Preying on Entrepreneurs
One experience I’ve had too much of is younger entrepreneurs being preyed upon. It’s a classic and all-too-often scenario I’ve seen played out over the years with student-entrepreneurs, but also three times in the past year with twentysomething college-grad founders.
What happened in each of these cases was fairly typical:
- They met successful entrepreneurs or businesspeople who were at least 15-20 years older. Over the course of several meetings, an opportunity for a “partnership” or “merger” or “investment” emerged, involving significant or majority equity.
- The founders reached out to mentors and advisors they know to get feedback and advice on the proposed deal. Those interactions uncovered some curious aspects of the deal and unanswered, but very important, questions.
- The founders were counseled to get an attorney involved. A couple balked, understandably because of cost, despite the assertion that it’s well worth the investment.
- The talks broke down, either because the questions remained unanswered, or the founders had a gut feeling that it was a raw deal.
To be fair, I know that some such scenarios work out fine. But I hope those share a common thread with the one outlined above: the key step of reaching out to unbiased, experienced people who have nothing to gain or lose and who ask tough questions.