Our investors enjoyed your pitch. We are pleased to offer you the following Terms Sheet:
Funding Target: $250,000
Equity to be sold or contributed, based on an agreed-upon:
-Value of Equity Contributed to Omega Legacy Fund X, $50,000
-Equity Pledge Amount, $75,000
-Total Value of Designated Equity, $375,000
Option 1, $7,000, due upon signing our agreement
Option 2, $20,000, we keep 50% of the first $40,000 we find to cover our fee
It sounds like they are going to attempt to go raise the money you need and charge you a fee for doing so. This is not a normal term sheet and isn’t a good offer. I don’t know your situation, but I would never advise the startups I work with to accept something like this. Happy to chat more about it if you need additional help, but my advice would be to pass and work with investors that have capital readily available to deploy.
Lots for you to learn in a startUP. You should consider CoFoundersLab's StartUP Accelerator. Big value for any Start-Up or Growing Company. We have live one-hour video conferences for Accelerator members with Q&A and fine-tuning both pitch decks and pitches for capital raise. We are also going to be presenting Companies, when ready, to investors at 1000 Angels. #1 on-online and virtual live program in the world. You should take a look and consider it. Here is the Accelerator landing page with the link to the application: http://info.cofounderslab.com/cfl-accelerator-lp To your success! Steve
We can argue about whether they are investors. They are predators.
This is toxic waste. Stay away.
Never Never Never do a deal like this as others have stated. Don't feel bad you let yourself get sucked in as far as you did. I am AMAZED...purely DUMBFOUNDED by the amount of entrepreneurs who fall for these types of setups. Years ago when I was 22, I was dealing with a group of 60 year old men, who naturally knew more than the young guy in their minds. They didn't, in part because by the time I was 15, I had seen more successful deals and projects go through than most do in a lifetime. Shockingly though, they had had previous success which is the beyond crazy element. Against my harshest words and advice, they paid a group $50k upfront to raise $10M. They never raised a dollar. Never even made a pitch to my knowledge. And guess what happened? The lawsuit that was brought against them became more expensive than the original $50k, so they lost even MORE money. Rule of thumb here. Think like the Hollywood Agents (Not in terms of being greedy but earning their fee), the Real ones. Real Agents NEVER charge upfront. They take their percentage on the deal if done, and on the backend. You NEVER pay someone to promise to do work. Think Exchange of Value in EVERY deal you do as an entrepreneur. You don't give value unless you are getting value. And you make sure that value is clearly expressed in as detailed of a contract as you can possible craft. Hang in there.
I'm late to the party, but just came across this. As others have said, this is toxic waste and the guy running this is clearly a scammer once you get to know him. His entire business is based on taking money from people before they realize that he can't/won't deliver. He's scammed a large group of people out of at least their time. Whether he's taken money is harder to prove.
If someone has already gotten involved with the organization, is there legal recourse? I can't imagine this is legal - though, if you signed a contract maybe anything goes?
The guy is also pretty litigious, so I've gotta insist on anonymity.
Danger Will Robinson.....(reference from Lost In Space) With anyone seeking a "Fee" based arrangement, you need to do extensive due diligence. Get a list of companies they've funded, speak with the Founders, and do not blindly send $.
A comment to clarify @DavidM's comment - in fee-for-services fundraising, it is common to have a retainer versus a success fee, particularly if the funding is complex and requires significant time to create a process and a "book" and usually in sophisticated fund raising (PE, Series A - n, M & A). This is not one of those times. Those will be for well known firms, not generic pitch contest results and have deep reputations and references. Additionally, in this, you will be expected to pay expenses as accrued versus receipts. Those expenses, however, will be approved by you up front.
Thank you everyone! I have been through an accelerator before, so this looked suspicious. I am glad the community here verified what I was thinking. I am fine with bootstrapping my way to customers and the right first investors.