5 Red Flags When Evaluating a Startup Investment
Date: April 20, 2024
Startup investments offer great upside, but they also come with substantial risk. To improve your odds of success, it's important to recognize the red flags that often lead to poor outcomes.
- 1. Overhyped Projections: If revenue forecasts seem too optimistic, they probably are. Always verify assumptions.
- 2. Weak Founding Team: Lack of experience, unclear roles, or internal conflict can signal future instability.
- 3. No Competitive Moat: If there's nothing defensible—like IP or strong brand—it's easy for competitors to catch up.
- 4. Poor Financial Transparency: Incomplete or inconsistent financial statements are a major warning sign.
- 5. Undefined Exit Strategy: If there's no clear roadmap to returns, the investment may be a long-term trap.
At Clariton Trust, we help you navigate these red flags through in-depth diligence and advisory. Stay cautious, stay informed.
