An investor wants a fee before they invest

Don't pay an investor before they invest. OpenVC's advice to founders is direct: "As a general rule, do not pay for the investors' costs." The only exception it gives is covering some diligence or legal fees at closing, when you know the money is coming (OpenVC).

What it looks like

An investor reaches out, or answers your outreach. There's a call, interest, maybe talk of a term sheet. Then a condition: a "due diligence fee", an "appraisal fee" or a listing fee before they can proceed. Or an invitation to pitch at an investor event, for a fee. Or, halfway through the call, the "investor" starts selling you their fundraising services.

The versions OpenVC describes

Pay to play: "you pay for a chance to be considered for investment". If nothing comes of it, the fee is gone.
Pay to pitch: founders charged to pitch in front of investors. OpenVC's point: "If you're a good opportunity, investors should want you to pitch them."
Bait-and-switch: an "investor" who turns out to be a fundraising adviser pitching you, with no intention of investing.

Some investors run paid side services, such as a deck review, and say so clearly. That's different from a fee demanded as a condition of their own investment.

Red flags

Any payment requested before money arrives in your company.
Fees with vague names: due diligence, appraisal, processing, onboarding, listing.
An investor with no verifiable track record: no portfolio companies you can contact, no public deals.
Urgency: the fund closes Friday, the fee holds your slot.

What to do

Decline any fee that comes before closing. Legal costs at closing are a normal negotiation; paying for the chance of being considered is not.
Verify the investor independently. Speak to founders they have funded, whom you found yourself.
Keep your data room limited until they have shown they're real.
Paste the message into the scam checker, which reads investor offers for up-front fees and missing terms.

Questions people ask

Isn't due diligence normal?

Diligence is normal. You paying for the investor's diligence before any commitment is not. Negotiated legal costs at closing are the exception.

What about accelerators that charge?

A programme that charges a fee is selling a service, and you judge it like any purchase. It's a problem when the fee is presented as the price of an investment decision.

Where can I learn the other founder scams?

OpenVC's article covers 17 ways founders get scammed. OfferVet's scam library collects the ones that arrive as messages.