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ACADEMY: What is due diligence?

Posted by Erica Duignan Minnihan on Jun 28, 2016 11:00:00 AM

 

Due Diligence may sound like a scary process, but it really just means exercising a reasonable standard of care before making an investment decision. During the due diligence process at 1000 Angels, we get to know the companies we are considering investing in very well. And a lot of that starts with getting to know the founders. We rely on referrals from other founders, 1000 Angels and experienced investors to help us meet founders that we can trust. If you have meet a founder for the first time and like his or her idea, make sure you do a lot of “asking around” and reference checking before making a decision. Many of the founders we have made investments in we have known for several years before actually writing a check. In addition to this, do your research on the company:

- Has it been formed properly?
- Are there any lawsuits pending?
- Do they actually own the intellectual property?
- Are management and the employees happy?
- Have they built a financial model that makes sense?
- Do they have enough runway to cover the monthly burn for 12-18 months?
- Who are the major competitors?
- How much control do they have over distribution channels?

These are just a few of the questions we ask during due diligence. Learn more at http://www.1000angels.com.


Topics: Venture Investing Academy