Don't Marry the First Investor You Meet

When you've got a business dream and no capital, the shadiest funding source looks tempting. But before you embrace investors without abandon, do what I should have done:

• Run a credit check on your investors to make sure they are using their own money. If you use venture capital firms you can find out by simply asking them how much cash they have left in their fund.
• Approach only investors that understand your industry.
• Go to major companies in your industry for funding advice. I should have spoken to the mergers and acquisitions groups at national media companies like Time Warner(TWX Quote), Tribune Company(TRB Quote) and Gannett(GCI Quote) to gauge their interest in investing in a company like mine or recommend potential investors.
• Stick to your guns about the amount of money you need and insist investors sign personal guarantees that they will cover the full amount.

This year, I raised money for a financial service start-up by taking less money and giving up more equity just to get investors who understood the business. Lesson learned.