Before putting their money into a company, venture capitalists (VCs) do a detailed analysis called due diligence. It involves verifying finances, evaluating the team, analyzing the market, assessing the business model, and other factors that determine the potential of the deal.
Here’s what VCs usually want to find out before making an investment.
#1. Founders’ background
Early-stage startups don’t usually have outstanding metrics that can help investors assess their potential. For this reason, 47% of VCs say the company’s team is the most important factor when making a decision to invest in it.
Due diligence at this stage starts with VCs checking the founders’ backgrounds. They make reference calls and talk to as many people as possible, including founders’ former colleagues, customers, and investors.