“Due diligence” is a term used for a number of concepts involving either an investigation of a business or person prior to conducting business. Certainly a voluntary investigation process that takes place before signing a contract. It is simply a matter of being careful.
It is a myth to believe that only investors need to conduct due diligence. And it is also wrong to believe that they will take offense when entrepreneurs turn the table on them. If they do, maybe it’s because they have something to hide?
All entrepreneurs, before starting any correspondence, owe it to themselves to do some preliminary research. You have to conduct due diligence on potential new investors as a simple part of the business process. Good investors will take this as a sign of seriousness and professionalism. It also saves them time if in the due diligence done by the entrepreneur discovers there isn’t really an appropriate fit for the business.
But so what can entrepreneurs do to facilitate their own due diligence process on investors?
Are you receiving a strange e-mail address? Can you see a link to the website? Can you find the persons profile on the website and again find their profiles on Linkedin, Twitter, Facebook and other platforms? Have you checked these and can you see a healthy and normal conversation taking place between the investor and contacts? If at any point you see things that don’t make sense this should raise a flag. You need to check their business registration and know who you are dealing with.
What are other strategies entrepreneurs can apply? Join the conversation and share your own experiences, tips and tricks!