Why is due diligence important?
Strict due diligence was not always necessary.
In the past, if you wanted to find investment for your business, your options were closely tied to the reach of your personal network.
This had the following consequences:
On the one hand, any investor you were introduced would most likely have come from a referral you trusted. As a result, trusting the prospective investor and their credentials was relatively easy. Most of the due diligence was accomplished via the intimacy of the referral.
On the other hand, your reach would have been limited to your network. And as a result, many businesses would have failed to find funding because their entrepreneurs weren’t linked to any ‘Old Boys’ Club’ or similar.