- Venture investing can involve extreme loss risk.
- A promising startup can still fail.
- A great product does not guarantee a great investment.
- Revenue growth may depend heavily on future capital.
- Future fundraising may not happen.
- Dilution can materially reduce ownership.
- Preferred shares may have rights ordinary shares do not.
- Liquidation preferences matter.
- Anti-dilution provisions matter.
- Convertible instruments can have complicated economics.
- Valuation isn’t the same thing as intrinsic value.
- High valuation creates a higher performance hurdle.
- Founder risk matters.
- Key-person dependency matters.
- Customer concentration can be dangerous.
- Burn rate can change rapidly.
- Runway can disappear faster than expected.
- Competitive threats can emerge suddenly.
- Regulatory changes can destroy a business model.
- Exit assumptions may be unrealistic.
- IPOs are rare and uncertain.
- Acquisition isn’t guaranteed.
- Secondary liquidity may not exist.
- Investors can lose 100% of their capital.
- The question is not merely “How big could this company become?” but “What must go right for my investment to work?”
B. PREMIUM BUYER CHECKLIST
COMPANY
☐ Legal entity verified
☐ Founders identified
☐ Ownership structure reviewed
☐ Product/service understood
☐ Market defined
☐ Competitive landscape reviewed
FINANCIALS
☐ Revenue verified
☐ Revenue quality examined
☐ Gross margins
☐ Burn rate
☐ Cash balance
☐ Runway
☐ Customer concentration
☐ Debt
☐ Outstanding obligations
CAP TABLE
☐ Current ownership
☐ Preferred/common structure
☐ Option pool
☐ Convertible securities
☐ Warrants
☐ Existing investor rights
☐ Expected dilution
INVESTMENT TERMS
☐ Valuation
☐ Security type
☐ Liquidation preference
☐ Conversion rights
☐ Voting rights
☐ Anti-dilution
☐ Information rights
☐ Pro-rata rights
FUNDING RISK
☐ Current runway
☐ Next funding requirement
☐ Likely funding environment
☐ Down-round scenario
☐ No-next-round scenario
EXIT
☐ Realistic acquisition candidates
☐ Comparable exits
☐ IPO assumptions challenged
☐ Time-to-exit considered
☐ No-exit scenario modeled
FINAL QUESTION
If the company never raises another dollar, what happens to my investment?
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