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We can avoid the most prevalent attacks from predators. Defend yourself from startup vultures, or prepare for your startup to be eaten.
1. Partial investments of Development firms
In rare cases, these partnerships will work out. If you're considering working with a dev agency to build your product, you purely want to do an fair play deal if you're a beginner. It'll help you uphold cash and makes the firm have investments.
Some will try to palter a split between equity and cash when you inform development companies of this. The problem here is that they often raise their prices, so they don't miss anything when your company fails. It makes you waste equity and pays almost full price.
There are many ways to avoid this snare. First, utilize Upwork.com and Odesk to build your initial test product and push as far as possible without expending any money on development. Then, when considering working with a development firm, tell them you're ageable to do straight equity. If the answers you no development shop will do that, they're slandering you.
If they agree to the fair play, ask how much they are demanding per hour and set a border on how many shares you're willing to give. Some companies will try doubling their charge per hour for fair play. When they try that, double the valuation of your company; hence it'll make up. It is ideal because now the development company only succeeds if you do. It will make them work harder and avoid dangerous shortcuts.
2. Pay to pitch
Some random groups will invite you to present your company to investors so hungry to invest they're drooling. You will make great connections and get funded. Even better, they'll coach you to ensure you're successful. They want $1,000+ for this amazing opportunity.
If this happens to you, on no account should you accept it? If an angel group likes what you're doing, they won't charge you anything to pitch to them. When an angel group attempts to use this trick on a random person, He tells them, "I'd only pitch for free." They instantly said no, and tried justifying their cost because of the value of their time.
He stayed clear and used the money to build their own business. Don't fall for this trap.
3. Asking to give up equity for connecting you with investors
We're being followed for our equity from an individual. He is the person who tells you that they have a list of all these investors, but if you want a piece of information, you have to give up equity. Not only should you not do this, but you should also immediately stop talking to this person. They're lavishing your time.
Any master who likes your company will make introductions for you without inheriting your shares. It's nice to have a skilled one on your team who have connections to the capital. Avoid making that the only reason you give them a piece of your company.
Rather than that, learn and copy their tactics. Go to conferences, meetups, and entrepreneur events. When you reach a potential investor, put them in an Excel document with all the other investors you've been meeting. Then, once every 4 to 6 weeks, shoot them a personal email with an update. You'll be amazed at how large your sheet will become. Without delay, you'll be more connected than the startup vulture that tried attacking you in the first place.
How to protect your business from business scams?
The answer is comparatively simple! Do your daily work. Do your research into the elements that could stand a threat to the well-being of your company. Then, take the necessary steps and use the right resources to protect your small business from fraud, such as integrating a fraud management system and employee education.
If you suspect you've doomed victim to a scam, immediately contact an organization specializing in domestic due diligence, like Diligence International Group. These experts perform in-depth research into your case to provide a comprehensive, professional report with solid conclusions. With their support, you'll get a better picture of your case and gain the know-how needed to seek justice against scammers.
Startups are vulnerable to several scams, with many witnessing their unfortunate consequences. Withal, as long as you do your due diligence in Shielding against fraudulent activity, your business is not necessary to face these implications. Train yourself, take proper precautions, and set yourself on the path to success.