Carpetbaggers come to town selling something sketchy (of dubious value) to “take” from locals without any intent of sticking around. Scalawags are their local enablers who lend credence to the carpetbaggers either out of naivete or because they’re in on it. As our startup ecosystem grows, we attract both – like moths to a flame. Beware.
I’ll (Jeff Saling) drop an occasional blog post in our newsletter to call out the behaviors I see – sometimes by name if it’s particularly egregious, and I hope our community will fight them off, like an infection. In chapter 1, I’ll pick on those who trade on the dreams and naivete of new founders. People or organizations that scam founders for cash and /or equity – – such as:
Charging founders a four figure amount to pitch to their investor group
Charging founders four figure amount and/or 2% equity to create a pitch deck, then access their “network”
Charging founders a four figure amount to “consult” on their business plan or financials – then pitch to their investor group
Getting professional help to create a great looking pitch deck is fine, but NEVER pay to pitch.
People or organizations that scam founders for equity with super sharky deals. This will happen even more as investment funds tighten.
Offer founders a $20k investment for 5 or 6% of their company… and access to their “network” of funders and mentors once they’ve completed their course.
Offer founders an investment – usually mid five or low six figures, then require they use the investor’s “professional services” to create pitch decks, business plans, rent office space, etc. – promising access to funders and mentors at the completion of a course.
You get the idea. These types of arrangements rarely work. Ask for success stats in advance – talk with other founders that have been in the program – and find them yourself. Don’t accept groomed references. You shouldn’t expect 100% great references – but be skeptical. It’s difficult because it seems SO REAL – SO POSSIBLE when you’re a founder and convinced you’ve got the next big thing.
Beware of Carpetbaggers and Scalawags.