I recently had a founder offer to pay me for advice. I said no and gave him the advice for free. Advice from an investor is one thing you should never pay for. Here are a few others:
1) Accelerators. No legitimate accelerator charges you money. Real accelerators give you an investment, typically over $100,000. If they’re not doing that, I guarantee you the program will be a waste of time.
2) Pitching Investors. You should never, ever pay to pitch investors.
A ton of founders make this mistake. I guarantee you that your money will be wasted.
No real investor would charge you to pitch them. These people aren’t investors. They’re scam artists.
3) Investor Intros. Just like you should never pay to pitch, you should never pay for introductions to investors.
Startups do not raise money through agents. Instead, founders speak with investors directly.
I introduce great founders to fellow investors all the time. But I never, ever charge for it.
Anyone who does is a scammer.
4) Advice. You should never pay an investor, founder, or anyone else for advice.
The ethos of Silicon Valley is paying it forward. I might live in Jersey, but even I know that.
You help others because someone helped you. You also never know when that person who needs your help today could help you with something!
If someone devotes several hours a month every month to your company, it’s fine to give them advisor shares. This is usually 0.25-0.5% of the company. I got these myself in a startup once.
But you don’t pay cash.
5) Networking Events. I’ve seen these “Startup Networking Night” things they want $100 to attend.
Networking events are not worth paying for. In fact, they’re not worth attending for free.
It’s fine to pay to attend a conference where your customers will be. But a generic “networking night” is a waste of time.
Wrap-Up
There is no shortage of people out there trying to scam founders.
The founders most likely to be ripped off are the outsiders. Women, minorities, people without networks, people outside SF and New York.
It’s messed up, because early stage founders have hardly any money anyway. But that’s reality.
But there are also decent people who want to help you. Find them. Don’t waste your time with the shysters.
More on tech:
Why European Founders Should Move to America
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