how to vet an investment
vetting a potential investment is known as due diligence this vetting process involves collecting data and facts about a firm or issuer of securities and reviewing available financial records past company performance is also considered and should be referenced against competitors anything else deemed material should be reviewed such as key personnel and the names of other large investors due diligence is primarily a way to reduce risk exposure and to ensure good decisions are made with available funds the process ensures that investors are aware of all the details of a transaction before they agree to it including potential risks or downsides for individual investors doing due diligence on a potential stock investment is recommended but voluntary for a venture capitalist vc firm making a professional investment in a startup company on the other hand due diligence is essential especially when it comes to understanding the startup s growth potential and exit strategy due diligence can be categorized as hard which is concerned with taking a deep dive into the numbers on financial statements and soft which is more concerned with the people within the company its brand image and its customer base 