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Due diligence fees?

doubledaydoubleday subscriber Posts: 2
edited April 2009 in Startup Funding
      I have recently been contacted by a potential investor for a start-up. They are requesting $2500.00 "due diligence fee", is this common practice for this sort of process? Also, is it common practice to not disclose referrals as an investor, or is this considered confidential information?


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    robertjrobertj subscriber Posts: 0 Member
    There are a lot of people "out there" who position themselves as "investors" when actually they are finders, brokers and other types of "middle-men". This group almost always asks for a "due diligence fee".
    Venture Capital firms usually identify their portfolio companies. There are often some exceptions and limitations - but you can usually get enough info to do a check on them.
    Professional Angels may be a bit less forthcoming - but will at least tell you the types of situations they have previously invested in.
    Generally, these folks don`t solicit you and ask for a fee at the beginning.
    You can contact me directly if you want to discuss the specific details of your situation.
    robertj4/9/2009 10:59 AM
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    menappimenappi subscriber Posts: 2
    Sounds suspicious, tell them to take the 'fee' out of the money they invest before they deposit it into your bank
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    OnlineCPAOnlineCPA subscriber Posts: 0
    I agree with Menappi. No kidding, up front fee before they give you money. SCAM!
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