What Is Due Diligence?

Due diligence is the process of independently verifying claims before committing capital. At the earliest stages it is proportionate: an investor writing a $5,000 check runs a materially lighter process than a fund writing $5M.

Core areas: the team and their history, the product and whether it works as described, customer evidence including direct references, the financial picture and burn, the cap table and any prior obligations, and the legal foundation including incorporation and intellectual property.

The most valuable diligence step available to individual investors is also the simplest: talk to customers. Revenue that customers will not defend in a phone call is usually revenue with a problem behind it.