What is due diligence in angel investing?

What is due diligence in angel investing?

Due diligence in angel investing is the process of thoroughly evaluating a startup before investing. It involves assessing the business model, market potential, financials, and the founding team.

Why is due diligence important for angel investors?

It's crucial because it helps investors minimize risks and make informed decisions. Proper due diligence can reveal potential red flags and ensure the investment aligns with their goals.

What are the key steps in the due diligence process?

Key steps include reviewing financial statements, analyzing the market, assessing the competition, and interviewing the founders. It's also important to check legal documents and any existing agreements.

How long does the due diligence process typically take?

The duration can vary, but it usually takes anywhere from a few weeks to a couple of months, depending on the complexity of the startup and the thoroughness of the investigation.

Can you give me an example of a red flag during due diligence?

A common red flag is inconsistent financial records or a lack of transparency from the founders. This can indicate potential issues with the business.