KNOW YOUR INVESTOR
THE IMPORTANCE OF INVESTOR DUE DILIGENCE
When an investor shows interest in investing in your startup, it can be an exciting time. They will want to carry out their due diligence on your company, to make sure that they are making the right financial decision.
However, it is equally important for you, as the founder of your business, to carry out your own due diligence. But why is this important? And what things should you look out for as a founder when looking into your potential investors?
ESSENTIAL RESEARCH
Knowing who your investor is is a vital part of having a successful working relationship. This is important for any business arrangement that you make, but even more so when someone is willing to put money into your company. This can help to avoid any unpleasant disagreements later down the line, which could potentially even lead to legal proceedings. There are several things to look out for when doing your due diligence.
YOUR CHEMISTRY
This might seem like a simple thing, but getting to know your investor has to include some kind of personal connection. Do not be afraid to discuss different scenarios with your investor, checking how well you gel with them on both a personal and professional level before you make your choice.
THEIR REFERENCES
Just like when you apply for a job, your investor should have good “references”. This means doing research into their previous investments, speaking to people in their network, and performing your own searches online. See both what successes they have had and what their reputation is within the industries they operate in – this can make all the difference to your understanding of them.
MAKE OBSERVATIONS
While you are discussing their potential investment, you should be constantly observing how your investor acts and reacts towards you. See how involved they are, how responsive they are, and how they speak with you. This will give you a good idea of what their expectations are, and how they function in day to day business dealings.
Finding investors can feel like an incredible thing – but make sure you carry out these checks and look before you leap.
ALWAYS TRUST YOUR GUTS
Sometimes it just feels wrong: everything on paper looks fine, but still it just feels wrong. What’s happening here? Well, chances are your rational mind is missing something that is right in front of you. But there is a part of you who clearly sees it, and it feels wrong. Here at Matters2, we have a few little rules we use as a compass to navigate our daily business lives and one of these rules is: “Always trust your guts!”
And we suggest you do the same…
Still not sure? Want a second or even third opinion? Feel free to reach out to us: we won’t be able to make a decision for you, but maybe we will help you to ask the right questions!
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