Angel Investor’s Challenge #2: Due Diligence

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Last Updated: May 26, 2011

First Posted: August 27, 2008 by Carl Filbrich

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risk verticle 300x299 Angel Investors Challenge #2: Due Diligence Thousands of new businesses are launched every year. A handful goes on to become hugely successful, earning vast profits for their original investors. Many more struggle to survive, barely keeping afloat. And many others, unfortunately, fail completely, losing money for their investors and never living up to their initial promise.

This is the second in a series of articles on the challenges you face as an angel investor, a brave soul who provides seed money for promising startups.

Due diligence is the research required to make certain that a business opportunity is really as promising as it seems. It focuses on identifying risks rather than rewards. In conducting this research, seasoned investors take a hard look at the startup company, focusing on the management team, business conditions, and investment terms. For startups that are already in operation, investors might study existing contracts and revenue projections. They might even talk to suppliers and customers who’ve done business with the startup.

Therefore, it’s definitely favorable for aspiring and beginning angels to learn, among other things, how to select a startup, how to spot risks and signs that the business might not be able to live up to its potential, and how to look for indications that management might be covering up problems that could turn out to be disastrous.

Venture Hype is designed to bring together visionary angels from all walks of experience into a free flow of participation, collaboration, and learning. It’s a dynamic, participative e-Learning platform dedicated to delivering tools, resources, and best practices to address the challenges faced by angel investors.

The next article in this series takes up another challenge for angel investors: how to base investment decisions on facts rather than intuition.

* For series, references are published in the last installment of the series.

Angel Investing, Definitions, Due Diligence

Descorpio

I feel that this kind of program is the need of the hour. Most of them would be ready to invest but do not have the knowledge on how to invest or where to invest. So if there can be a team of experts who can guide them, they can make a good business with each other. This idea seems to be too good for me for doing a business where mutually both can benefit.
http://venturehype.com The Hyper Team @ Venture Hype

Thanks Descorpio. You're right that many people have the capital to invest but not sure where to begin. At Venture Hype, we aim to tap into the collective intelligence by interviewing industry players and provide informational content to help prospective angels get started. As always, if you have any suggestions or feedback, we'd love to hear from you.
http://venturehype.com The Hyper Team @ Venture Hype

Thanks Descorpio. You're right that many people have the capital to invest but not sure where to begin. At Venture Hype, we aim to tap into the collective intelligence by interviewing industry players and provide informational content to help prospective angels get started. As always, if you have any suggestions or feedback, we'd love to hear from you.
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