How to Do Due Diligence on Investors

This is main my Quora answer to “How do I perform due diligence on investors?”

Choose an Investor Like You Would a Spouse

Check out InvestorsI’m so glad you asked this question, because it’s really important and vastly underemphasized. You should choose an investor like you choose a spouse. Due diligence is essential.

First, tell this person you want to do this. Don’t be shy. Don’t be embarrassed. It’s what you are supposed to be doing. Good investors will be glad you’re doing it and help you with links and people to talk to. If an investor pushes back, that’s a danger sign. Anybody who doesn’t want this to happen is trying to hide something. Be scared.

No web footprint is a warning sign

Second, look at their online footprint. A legitimate investor will have multiple websites, bio available on LinkedIn, a Facebook persona, a Twitter persona, etc. Websites ought to include a company site, a firm site, a personal ego site. Often there are blog posts too. Take some time to see who this person is, in the public persona.

Talk to other startups

Third, talk to people running the companies that that person invested in. A legitimate investor will give you a way to find out what those companies are, and from there you can talk to them. To deal with any doubts, you should tell the investor you want to do this and ask for contact info from the investor directly. But don’t limit yourself to just those contacts.

Take all three of these steps.

Leave a Reply

Your email address will not be published. Required fields are marked *