4 Steps to Do Due Diligence on a Potential Investor: Credibility and Verification

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investor due diligence

In a recent interview, Starling Bank founder and CEO Anne Boden shared how she once pulled out of a funding deal because it emerged that one of the investors' founders had been involved in a crime.

Look online. There are loads of guides for investors on how to do sound due diligence on a potential investment. But try to find out more about actually checking out your potential investor and making sure their money is clean, and you're likely to have less success.

Investors can, of course, make or break a company. They are the ones who have the deep pockets and they are the ones who can fund your business's growth when you need it most. But, not all investors are created equal. There's risk involved in taking on an investor so you want to be sure that they're credible and verified before committing to working with them.

What do I mean by credibility? Well, this means that their story checks out according to public records and other sources. Do they have a good reputation? Are they known for being honest and truthful?

And what about verification? This means that you should verify their identity with documentation like ID cards or passports before doing any further work together - even if it's just a meeting.

Why is it so important to do this? Because you don't want to be working with someone who's not credible or who may even have a criminal background. It could end up costing you time, money, and possibly your business if things go wrong.

So how can you go about doing due diligence on a potential investor? Here are four steps to get you started:

Step One: Check their Credibility

The first step is to check the credibility of the potential investor. This can be done by first looking broadly at public records. In the UK this might include sources such as Companies House and the Electoral Register, as well as online sources of news and background information. If their story checks out then you can start to build some confidence that they are legitimate.

Step Two: Verify their Identity

The second step is to verify the potential investor's identity by asking for ID cards or passports before meeting with them face-to-face or doing any further work together.

There are a few different ways of verifying an investor's ID. One way is to use credit checking sites like Equifax, Experian, and Creditsafe. These sites will be able to tell you if the potential investor has any outstanding debt or a bad credit history.

Another way is to get ID documents certified by a regulated organisation like a law firm or Dun and Bradstreet. This will help to ensure that the documents are legitimate and that the potential investor is who they say they are. This is especially important for overseas investors where you may not find it as easy to compile a clear credit and criminal record history.

It's always better to be safe than sorry so take your time in doing due diligence on any potential investor. It could save you a lot of headaches down the road.

Step Three: Ask for References and Recommendations

The third step is to ask the potential investor for references or recommendations from their previous work with other companies or investors. This can help you feel more confident about your decision on whether to enter a partnership with them, especially if they have a lot of good reviews online - although this isn't always the case.

Do your own research too. Ask around - see who knows them, what they have to say. One particularly eye-opening step is to speak to others who have worked with them (you could even ask them to share references from others they've invested with), to see what they have to say about the record and manner of your would-be investor.

Knowing how they've conducted themselves with others like you will tell you a lot about who you might be climbing into bed with.

Step Four: Interview your Investor

It might seem obvious but actually talk to your would-be investor about their background, their ideas, and what they hope to achieve. This will help you get a better sense of who they are, what their goals are, and how they plan on helping your business grow.

Does your idea or business model fit well with theirs? Do you have complementary aspirations, products, or skills? If in doubt, ask for more information, ask to meet key members of their team, and air your concerns. Just like a job interview, deciding to take on investment is a two-way street and you've likely poured too much time and energy into your business or idea to risk jeopardising its success by choosing the wrong backer.

Remember that a good investor is often one who has the right amount of altruism and ego to invest in your company, not just because they think it's going to be profitable but also because they share your vision for success.


In the end, you want to make sure that any potential investor is credible and trustworthy. The most important thing in due diligence is your gut instinct. If something doesn't feel right about a person or their business, don’t move forward with them as an investment partner even if they have good references from others who've worked with them before. The right backer is worth waiting for and won't mind cooperating with you so don't be afraid to get this right.

If you have any questions or would like to share your thoughts on this topic, please get in touch!