
Chief among the red flags investors should look for when considering committing resources to a start-up is a lack of passion on the part of the company’s leadership. Oftentimes, people who form new businesses aren’t fully committed to their projects on account of other professional commitments. Be wary of any companies that have CEOs who are slow to return calls or unable to define clear pathways to success for their ventures, as this could indicate a lack of commitment.
You should also research prior investment, as many start-ups will have received some form of funding before they reach you. Pay particular attention to any that have received investment that wasn’t followed up with later backing from the same investors, as this is often an indicator that the company has no forward momentum and others have already withdrawn, having identified issues that aren’t immediately apparent to you.