What is due diligence?
Due diligence is the thorough review you perform before an investment. It's about verifying facts, understanding risks, and ensuring you make an informed decision.
Key areas
- Financial DD — Review revenue, costs, cash flow, and balance sheet.
- Legal DD — Check corporate charter, agreements, disputes, and intellectual property.
- Commercial DD — Analyze market, competitors, and growth potential.
- Team DD — Assess founders, management, and key employees.
- Technical DD — Evaluate product, tech stack, and scalability.
Common mistakes
- Relying too much on marketing materials.
- Missing right of first refusal clauses in the charter.
- Not understanding the cap table and shareholders.
- Ignoring the competitive landscape.
Summary
Due diligence takes time but protects you from bad investments. Never compromise on thoroughness, especially in unlisted companies where information is limited.