When fundraising, remember—everyone is trying to cheat you.

Well, that’s not really true, but it’s obvious that we’d all be skeptical if a foreign “prince” is offering a start-up company several million dollars with almost no conditions. It might be easy to see through the prince’s scam offer, but it isn’t always that clear.

Several weeks ago, for example, one of our clients was approached by a seemingly legitimate overseas investment company that offered the client a sizable loan with little due diligence necessary. The company had a passable website, email addresses that appeared legitimate (as opposed to Hotmail or Gmail addresses), telephone numbers, etc. A representative of the company engaged with the client first, next with lawyers here at Foley on conference calls, and eventually presented a term sheet for the multimillion dollar loan. In exchange, the investment company wanted the client to buy an insurance bond securing payment on the loan, to be purchased through the company and paid for prior to the loan closing. That’s when we cut off discussions.

It’s actually a fairly common scam. In another instance a few years ago, another client was approached by a potential overseas investor whose family supposedly owned a diamond mine. We were finalizing the negotiation on terms for an investment when a simple background check showed that there was no diamond mine and no cash for an investment. We still don’t know exactly how the scam was intended to play out, but again, we cut off discussions immediately. Maybe the investor just liked to lead people on.

Stories aside, the real problem is that we’ve all seen investments come together too quickly, with little diligence from unknown investors. Successful investments like these do occasionally happen. But be careful and don’t be dazzled by the prospect of money—there is no free lunch (even from a prince). Start with some diligent research on your potential investors before you’re too far down the road, whether they’re performing much diligence on your company or not. Start simple enough with Google, but be prepared to do professional background checks.