Angel Investors:
7 Online Business Plan Scams and 1 Real Deal

Online business plan scams are far too common.  In fact, the online hype for "angel investors" is often nothing more than an online business plan scam. Here's how to spot them -- and one real deal.

We've all seen the hype:

"We'll put your plan in front of thousands of investors!"

"We'll write you an award-winning online business plan!"

"Only $3,000 for thousands of investors to learn about your company!

I cringe every time I see one of these ads. Vultures are preying on honest business people who want to fund their businesses. Here are some ways to spot them:

1. "Only qualified investors see your business plan." Yeah, sure. And who "qualifies" them? Have a friend try to sign up as an investor (that part is usually free). How is she "qualified"? Is there a background check? Does she submit a financial statement?

Odds are that she will be asked to do nothing more than sign a statement that she has a certain net worth. That's no "qualification" in my book. So who are these "investors"? Who knows. One could be your strongest competitor. 

2. "You approve anyone who sees your business plan." Okay. So what are you going to do to qualify the potential investor? Are you going to run a background check? ask for ID? ask for tax returns? or just be so happy that anyone wants to see your business plan that you jump on the idea?

(That's how these scams get away with charging thousands of dollars -- too many entrepreneurs are desperate for funding.)

3. "It's only $500 (or $300 or $100) to register." What does it matter if it's free? If it is diverting your time and energy and resources away from finding a viable investor, it's not worth it.

4. "Your idea is great, but we need to put it into our format. This will only cost $800." Don't walk -- run from these guys.

5. "Your idea is so great that we want to invest $2,000 in it." (That's after you spend $5,000 to put it into "their" system.) Do I really need to comment on this?

6. "Talk with a satisfied customer, or 2 or 3." Here's this entrepreneur who just got $2 million in funding, and he has nothing better to do than sell the web scam to you? Trust me, entrepreneurs who just get funded barely have time to eat, let alone talk.

7. "Look at all these written testimonials." This is harder to disprove because the testimonials look so real -- even the companies might be real. But unless the testimonials, and the companies, can be verified independently, I wouldn't trust them. And I'll lay odds that they cannot be verified independently.

There was once one huge exception to this: ACE-Net. This is more properly the Access to Capital Electronic Network run by venture capitalists, institutional investors and individual accredited investors. It was developed by the U.S. Small Business Administration's Office of Advocacy to encourage the creation of a national marketplace for investors to find and invest in equity offers by small companies.

ACE-Net, however, no longer exists.

There are a slew of organizations and programs that have replaced ACE-Net, and even some pretenders that are little more than online business plan scams themselves.  Please take the time to familiarize yourself with many of the business funding options available, beginning with the links at the bottom of this page.

And do remember the caveat:  If it is too good to be true, it's not true.  Be wary of promises, and especially so if there is any up front money.

Work from referrals, both from personal referrals and from trusted online sources.  No matter how prevalent online business plan scams may be, if you trust your gut you can probably spot them.

Author: MaryAnn Shank

Ms. Shank has been a respected business plan writer for over 20 years. Her direct involvement with angel investors and venture capital led her to create this cautionary tale for small businesses seeking funding.

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Also see:
How to create an effective online business plan

What angel investors look for in a business plan, and these articles: