top of page

Entrepreneurs Who Should Not Be

Updated: Mar 18, 2022

This article (by me) was originally syndicated in 36 city business journals but the essay below has been updated for you with some subsequent eye-openers.

If there isn’t a “Darwin Award”© for entrepreneurs, there should be, for people who would benefit business most by leaving it. I’d like to nominate the speakers of the following, eye-popping quotes in response to logical, due diligence questions. The responses may elicit “you must be pulling my leg” reactions; however, they are all true or abbreviated responses by entrepreneurs or their investment bankers. A single hour’s research per company uncovered most of the underlying issues. Following the quotes are several free and useful research websites and search tools by which investors can research entrepreneurs and by which entrepreneurs can research board members and service providers. If you tend to be trusting by nature, verify, too.

- “Litigation is just a cost of doing business,” said one CEO regarding more than five current suits, judgments and settlements I found against companies in which he was listed as a director or president, including, sadly, a “charity” of his not listed with the IRS.

- “He wasn’t a very involved director,” said a company president, regarding one of his directors, who was indicted for bribery and fraud as a director of another company.

- “I don’t think the IRS tax lien will really discourage investors. People will either love or not love our business.”

- “We don’t think of it as a conflict of interest. We think it is efficient that our major suppliers are also owned by members of our management team and Board of Directors.”

- “No; we don’t want an escrow account with an independent bank and a second signature before releasing investors’ money. Yes, we are raising money to start a bank.”

- “Those two corporate bankruptcies were not my fault,” said an entrepreneur seeking investment by showcasing his financial management skills. Unfortunately, the state and county also list five recent personal liens and judgments against him by businesses and taxing authorities.

- “I learned my lesson,” shared a serial entrepreneur, questioned about evidence that he had served time as a white collar felon for duping investors. “Different investors.”

- “Yes, there is another company with the same name that owns the IP we are describing in our documents as our company. That is because we want to raise money to buy them.”

- “I know that the money we want to raise now is not enough to fund the business model I have described. Our plan is to raise enough money from individuals to buy a public shell or go public, and then raise money from stock purchases to start the real business.”

- “Oh, I didn’t realize that another company’s website says to report anyone else trying to represent the product our client wants to raise money for, but he plans to sell it in Mexico, not here.”

- “That journalist hates me,” admits a president regarding an article in his hometown business paper that cited lawyers and investors suing him for a prior business deal very similar to one that company press releases were currently touting.

- “Yeah, we’re updating those filings now,” affirmed a CEO of a pink sheet company in 2006 (the most recent filings were from 2000). The company specializes in managing other companies.

- “I haven’t done anything in real estate development before, but I ran a very successful dry-cleaning business,” said a young and enthusiastic entrepreneur.

- “I don’t know why they are suing me. It was my dad’s store,” said a man charged with 65 counts of petty theft and 27 counts of forgery, hoping to find investors for a new business venture. These quotes prompt two questions: How many knuckleheads do these entrepreneurs and investment bankers think are out there? Are people really willing to write a five or six or seven digit check for a well told tale without a bit of research?

Each of these responses resulted from questions after research that took one to three hours per company, from publicly accessible documents, reading the Private Placement Memorandum (PPM), or just attending the investor presentation.

Most entrepreneurs like an audience, and if you ask the right questions, you’ll get an illuminating earful. Then hide your wallet until you hit the Internet.


Below are extremely useful, free websites and Internet search tools that potential investors, investment bankers, and even employees can use to review a business prospect. Useful Search tools: Internet searches are harder for common personal names, company names with generic phrases like “Beautiful Flowers” and initials, like “ABC Corp.” Researchers would do well to try several combinations, such as name and city or name and industry.

Useful websites:

* This site is for public companies. One can search for individuals who might be major stockholders or prior directors or managers, or if a company has been sanctioned, has changed names several times, or is a wholly owned subsidiary.

* Anyone who donates money to a charity or religious organization should see if it is listed with the IRS as a 501C3, which allows for a tax credit. If the charity is not listed, why not?

* This website (See Broker Check section) lists every currently licensed individual and broker-dealer in a very easy, searchable system, which includes any disciplinary disclosures and prior employers, too. It also lists people who left the industry as long as ten years ago, perhaps under a cloud of sanctions, which are also listed. The website lists the code of ethics and rules regarding most types of investment sales by which all registered people are bound. People not listed here are not registered but call themselves financial service providers.

All three of the above websites have a “wall of shame” section, too.

* Visitors can search for companies and charities affiliated with the BBB and for company complaints filed with the BBB, by city. This site is less useful for financial industry firms and more useful for companies that sell some kind of inventory or other service.

* A number of websites, such as Edgar and Hoovers, require log-in and membership to access information more easily available, for free, through Yahoo. A visitor can search for press releases, and access public filings and stock price histories. Anyone who has served as an officer of a public company should be searchable.

* The most highly used search engine is very user friendly. Searches reveal information about individuals as varied as book reviews they have written, blogs they have visited and political candidates and charities they have supported.

The websites of counties and states across the country vary widely in their web-readiness. Some have committed years and millions of dollars to filing documents electronically for the convenient access of the public. Texas and Alaska have very open records policies. California has stricter privacy policies. On the Harris County Civil Court website, visitors can search for incorporated and DBA companies, for civil suit dockets according to plaintiff and defendant (and read the outcome) by company and individual names. On the Harris County Appraisal District website, visitors can search for property records, including ownership and tax payments. An investor might want to assess whether the entrepreneur owns property or is a flight risk if a deal goes sour. Similarly, an entrepreneur might want to determine if a potential investor owns or rents that mobile home or a mansion. In both cases, the inquirer can see if tax payments are current. All states have a secretary of state website. Although the customer friendliness varies broadly, these are good sources for checking out any licensed professional, many incorporated companies, and other useful information about white collar crime prevention. This website enables visitors to search through city business journals from Albany to Wichita, which may have articles about an entrepreneur or investor active in that city.

35 views0 comments

Recent Posts

See All

Why Do I Have to Pay Money to Raise Money?

Every week, Bryan receives calls from early stage entrepreneurs. Recently, one bemoaned, “Why do I have to pay money to raise money?” “Well,” asked Bryan, “have you tried to raise money for free?” “S


bottom of page