Due Diligence - A two way street

Here at Tempting Ventures, we’ve been on both sides of the investment fence: as Investors and also as Investees. Of course, as Investors, we conduct our own due diligence when we are considering investing in a team or a business, which gives us the confidence that we are making the right decision to invest.

However, investment is about far more than investing and risking capital. It’s about a relationship, trust, team spirit and having aligned goals and outcomes. That’s why we always recommend that teams considering taking investment should do their own due diligence too.

Investors will point potential Investees towards their existing portfolio, but I would encourage you to look far beyond that for honesty. One of my top tips is to get your Investor to introduce you to a previous partner where they have been through the full life cycle of an investment together. Ask that previous Investee:

·      Would they recommend the Investor as a true partner, in both the good times and the bad?

·      Do they feel that the Investor consistently added value beyond capital introduction?

·      At exit, were all parties collegiate and honourable?

·      Most importantly, would they work with the Investor again, even though they now need the capital less!?

The evidence that your Investor has a great track record, not just by taking their word for it, but from what you’ve heard from their previous investees, will go a long way to reassure you of their credentials.

So, don’t forget – whilst your Investors will quite rightly carry out their own due diligence to assess your credibility for investment, this is a two-way street, and you should also do your own due diligence.