Watch Out for VC Scams Looking to raise capital? You could be a target for con artists. To avoid getting scammed, stay on the alert--and trust your gut.

It was just before Christmas 2006. Danny Nielson* was sitting across the table from a friend. They were talking about raising money for Nielson's growing business. Nielson described the contact he'd recently had with a potential investor. "I'm just not sure he's for real," Nielson told the friend. "He's asking for a deposit, so we're checking him out."

First Contact
Several weeks earlier, Nielson had posted his company's business plan on one of the many websites that purport to connect entrepreneurs with angel investors and venture capitalists. Nielson, 37, knew the drill. He had worked with investors and investment bankers before--he had even invested in other people's businesses--so he was not going to get too excited about anything before he checked it out.