The CBS Discussion Forum

Hi,

I have a good friend who has been aproached by a "Private Equity" firm that
wants to raise money for his start-up. Sounds good until I learned the
details - they do not have a fund but will go out and theoretically find
investors for him and then take a 10% commission. They also want $25 -
$50,000 up front to prepare marketing materials and biz plan etc. This is
not my area of expertise, but the cash up front doesn't sound right to me.
It also does not sound like any PE firm I've heard of.

As background, this is literally 2 guys working out of the guest room. They
got their product into Costco late last year and did really well. Costco
want to do a very significant roll-out. They did $700k in Revenue last year
- most in just 1 store - and should do about $10 MM this year if they can
deliver. all good. The problem is they need a around $3 Million to build out
their infrastructure and don't have it.

My questions:

1. Is this "Private Equity" firm a likely scam.
2. What is the best way for these guys to raise money. Familly, friends and
credit cards are tapped out, they're already working 150 hrs week and
there's no written business plan

thanks,

Robert Horowitz, '91