Your pre-revenue startup has developed a fascinating new product/service guaranteed to captivate consumers whose tastes mirror your own. With sufficient investor money and the right digital marketing strategy, success is assured. Your projections say so. Time to contact venture capital firms that specialize in providing seed capital.

Wrong.

I have great respect for venture capitalists and the role they play in bringing new technologies to market. Many specialize in early stage, seed round investments. Typically, these firms look for game changing, first-of-a-kind ideas, rather than incremental enhancements to common products and services. They look for category-defining concepts with large market opportunities and clear paths to commercialization.

Few seed-stage startups make the cut.

Unfortunately, there is another, far-from-scrupulous class of (so called) venture capital firms, one that is less discerning and more demanding. These small boutiques make relatively low investments or debt commitments, usually not enough to fund a full product launch or to reach a significant milestone. They offer quick funding turnaround and “boilerplate” paperwork. Anxious entrepreneurs who fail to read the fine print soon realize that the funding came at a very high cost: Consulting fees, expensive related party transactions . . . and effective loss of control of their companies.

Every industry has its fringe participants. Driveway pavers who offer great deals only to disappear when quality issues emerge. Or that auto shop that seldom fixes the problem in question but always finds other costly repairs to bill. Venture capital is no exception.  It falls on the consumer or, in this case, the entrepreneur to protect himself or herself.

How?

I could outline the obvious choices, like seeking guidance from experienced mentors, board members and lawyers. Overreaching “venture” deals are easy to spot. Unfortunately, I often encounter entrepreneurs whose advisors are nothing more than names on an investor pitch slide; seldom are these individuals available when needed. For these entrepreneurial orphans I offer the following, simple guidance. Look in the mirror:

The vast majority of pre-revenue startups are just not suitable candidates for seed round venture financing. If yours is a niche product or service, if your annual sales are negligible or nonexistent, if you’ve never worked with outside investors, if you have no startup or other relevant managerial experience, if you have no issued patents or defensible IP, if you have no strategic partners . . . you’re not ready for venture capital. Don’t even go there.

Consider other funding options. And, consider this somewhat dated but still relevant article from “Entrepreneur Magazine.”