Legal agreements

How to verify an investor?

Beven Spangenberg Messenger Marketing Expert

Last updated on September 8th, 2020


Jett T. Angel investor, startup advisor, entrepreneur, ideator, engineer, published author, producer, ...

August 11th, 2020

How should you proceed? You shouldn't. Run away, fast! I guarantee this is is a scam.

You are being set up for identity theft and anything else they can get their hands on. The fact they offered $1M when you asked for $50K is a dead give-away. And a company with 421 employees doesn't have their CEO directly reach out personally to offer $1M to strangers over the internet. This should be obvious. You are right to question it. You are wrong to leave any doubt at all as to what this really is.

AShu Co-founder I CTO I Co-adviser I Full stack developer | WebRtc Developer | DevOps

May 5th, 2020

Hey i had also got this type offers but in reality he is fake .when i skype video called he don't receive but by mistake he received looks different than his profile . So take care i say check first on internet , get documents related that company and also talk with video call .

Until you get satisfaction and reality before that don't share anything.



Gaurav Need a BDM for ASEAN Market

May 5th, 2020

If it is possible to book a meeting, book a meeting at his company office. In this way, you can see the office and him personally and can ask around regarding your concerns from like guards or people on different floors. If this gentleman has invested in other companies too, ask those guys about him.

Justin Gaynor One successful startup thru exit, Engineering PhD, semiconductors and sensors, global bizdev

May 5th, 2020

Credible investors don't offer 20X the requested amount. You are right to be skeptical.

David Whitfield Founder and CEO

May 6th, 2020

1. Stay sceptical

2. Never trust online profiles. Way too easy to fake who he is and where he works

3. Is your product in his specific area of expertise? If not, its probably a scam.

4. Ask him for references. If he is a bona fide Investor, he will respect your request. If he is a fake, he will either go away (or provide fake references)

5. Research his references

6. Do more research on his references.

7. If you still have doubts, walk away

Dane Madsen Organizational and Operational Strategy Consultant

August 10th, 2020

It is a scam - and pretty common on LinkedIn

Ronnie Spang Problem solver; inventor, AV designer, audio-visual programmer, team leader

Last updated on August 12th, 2020

Draw up a contract.

Have it reviewed by your accounting and legal team.

If they sign the contract: they are legally obligated to make good.

Contract should have provision for default on either side.

Determine investor's involvement requirements and suitability for your founding team.

Is this active or passive investor?

Does the investor have industry experience?

Do you want their input?

What is this investors interest?

Why are they funding you?

Are they connected in your sector or trade?

Do they work for or own shares in a competitor?

Or potential partner company?

Is there an agenda?

Do they own shares in a potential supplier or customer to your company?

Any conflict of interest?

Will this be your sole investor or merely a lead investor for a larger funding raise?

What stage of capital raise is this?

What valuation caps?

Any discount on future raises?

What terms and conditions?

How much intangible value is the VC offering the startup?

How much value is the startup offering the VC?

These are often unknowable, even for partners in either side.

I own a SAFE position in an early-round startup that I thought for certain that I could market the heck out of as it is in my industry.

But they are doing better sales and marketing than I ever could, tho I am doing what I can to increase their exposure via Linkedin and industry connections.

I am still DELIGHTED to own shares. But recognize that we can over or underestimate investor value. (Even our own)

I am always leery of a single large investment or a single investor or a single founder.

More eyes are always better. 2 heads are better than 1.

I tend to prefer crowd funding with the terms negotiated with the single large investor to become the lead investor using that as a template for crowd funding. Just as an investor should not put all of their eggs into one basket: the same goes with your startup. More investors equal more eyes and ideas. Most will be passive and have little to say, but even the most passive investor might see something and say something that could help you to launch your next level of success. Leverage the power of a team, use this negotiation to springboard the next one.

Highly suggest negotiation with this investor, have your accountant check the valuations and your legal team check the terms and conditions. Retain a majority stake and controlling interest and leave room for future investors and equity raises. Do not give away all of your equity at the outset. Sell SMALL equity stakes ONLY. If you are early stage: at most set a lower valuation cap and allow for discount on future raises. That rewards early investors without giving away the farm in equity percentages.

David M

August 12th, 2020

Not even remotely how real investors operate.

Peter Ozonyia Founder & CEO at Education Frontliners: International Student Recruitment Agency

August 10th, 2020

Hey Beven,

If I were you, I would never disclose any of those personal information over the internet just like that. I would advise you to seek one-on-one meeting with this so-called mysterious investor. Covid or no Covid restriction, book for face-to-face meeting and possibly at his office so as to get to know him/her more better. After all, an investment offer of $1 million is not a cheap deal to transact over the internet. I'm quite suspicious.

Ajeet Kumar Founder of 5 startup good success. Looking to contribute in Strategy and GTM

August 12th, 2020

From your message, it seems you are in final stage of discussion. If its 1st or 2nd, round of discussion, certainly, you can mask confidential details and share rest.

Is he communicating with you from his company email id or personal? If its personal, stop communication, its fraud. If its company one, you can call, drop email to couple of company executive and verify, if he is the one, he claims.