Every EquityNet investor goes through a self-accreditation process when they sign up. They are also required to complete a profile that describes themselves and their investment interests. Then, new investor signups are screened by EquityNet’s staff before being allowed to access deals. In fact, we only allow access to deals to around one-third of the investors who sign-up.
Even with all that filtering, EquityNet does not endorse investors. Research investors. Take their money at your own risk. Be aware that scam artists, posing as legitimate investors, often prey on an entrepreneur’s fund-raising efforts. This is a time when entrepreneurs are vulnerable, and are sometimes willing to take the first deal that may arise.
While EquityNet is doing all we can to prevent fraudulent investors from entering the site, there are some things entrepreneurs need to watch for. With the following tips, entrepreneurs can better prepare themselves to avoid scamming.
No Money Up Front
Generally, investors will not ask for money up front, and they will not ask you to wire it to them. If you ever have questions or concerns, ask the investor. If the investor is unwilling to answer to your satisfaction, then move cautiously before entering into an agreement.
Meeting a potential investor face-to-face is critical. If an investor is about to invest into a business idea, the investor should be eager to meet with you. If not, beware.
Beware of Foreign Funding
The Sophisticated Nigerian 419 Scam is one such scam. Beware of any international “firm” which requires a “fee” to be sent through a wire transfer to a foreign bank. The FBI warns against this and other similar scams. Take a moment to familiarize yourself with other scams where you could be targeted. See www.fbi.gov/scams-safety/e-scams/e-scams
To invest in your company the investor must be accredited. Do not work with anyone who is unfamiliar with what it means to be an accredited investor. For more information about the requirements to be an Accredited Investor, visit www.sec.gov/answers/accred.htm
Report to EquityNet
Please let EquityNet know of anyone who you find to be suspicious by emailing firstname.lastname@example.org. This will help us in our continuing efforts to keep our investor network limited to only the most credible and sophisticated investors.