Due diligence fees?

doubledaydoubleday Posts: 2subscriber
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?

Comments

  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    Doubleday,
     
    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
  • menappimenappi Posts: 2subscriber
    Sounds suspicious, tell them to take the 'fee' out of the money they invest before they deposit it into your bank
  • OnlineCPAOnlineCPA Posts: 0subscriber
    I agree with Menappi. No kidding, up front fee before they give you money. SCAM!
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