Editor’s Note: No companies are named below. The questions come from real Star of Genesis sessions, and they travel well from one deal to the next.
Picture the deck. It is polished, the founder talks well, the market slide has a number with a lot of zeros on it, and the round closes in three weeks. Somewhere at the back of your mind, a small voice asks the question every private investor eventually learns to listen to: what am I not being shown?
Most people don’t have a good way to answer it. Diligence on your own usually means a few phone calls, a skim through the data room and a gut feeling, all squeezed into a deadline set by the person who wants your money. The founder has told this story many times. You are hearing it for the first time, which is why having a structure helps.
Here is something worth knowing before you start. CB Insights looked at 431 venture-backed companies that shut down since 2023 and found that 70% ran out of capital. That sounds like the answer, until you read what the report says next: running out of capital is “almost always the final cause of death, not the root problem.” The money ran out because something went wrong earlier. The product wasn’t needed, or the sales channel never worked, or the team couldn’t deliver. Good diligence goes looking for that earlier thing while it can still change your mind.
Start with the customers. Is anyone actually paying, and do they keep paying? Revenue, signed contracts and real shipping dates count as evidence. Interest, unfunded pilots and “conversations with several large players” do not. At Genesis, every company goes through the same four checks: traction, technology, market potential and fundraising strategy.
Then look at the people and the raise together. Find out what the team has actually delivered before, and call someone who has worked with the founder, ideally someone the founder didn’t suggest. Look at how much is being raised, what it is meant to achieve and how far it will go. A founder who can tell you exactly what the next milestone costs usually understands the business. One who can’t is telling you something too.
Do read the paperwork. The cap table tells you who already owns what, how much the founders have kept and whether earlier investors hold terms that could cut across yours. A founder who has given away too much too early is a risk no growth chart will fix. Ask for the latest numbers in writing and see how long they take to arrive.
When you finally sit down with the founder, ask what is hard to rehearse. Who pays, how much, and how often? What happens if the biggest customer leaves? Which approval or regulation stands between this product and revenue, and how long does each step take? What exactly does this round buy? Then watch what happens when you ask something they didn’t prepare for, because that is closer to how the company behaves when things get difficult.
Some of the best questions come from people who have worked in the founder’s industry. In Star of Genesis sessions, members have asked about regulatory categories, what a treatment costs and whether it can scale, and how a product actually reaches its customers. A deck can’t settle any of that, and an investor working alone might never think to ask.
Pay attention to how bad news lands, too. A founder who says plainly that a number came in lower than hoped, or that a milestone slipped, and explains what changed, gives you more to work with than one with a polished answer for everything. Every answer should be something you can check.
That is where a club like Genesis earns its place, because diligence there is shared. A company presents at Star of Genesis and walks members through its traction, technology, business model and commercial potential. Members question the founder live, talk through expansion, fundraising and regulatory issues, and offer advice and introductions. Every session ends with clear next steps, whether that means sending materials, arranging a site visit or making an introduction. Company details sit on the Dealum platform so members can review them at their own pace, and anyone who wants to go deeper is invited into a due diligence meeting.
You get to watch how a company handles other people’s questions, hear from members who know the sector, and decide with a lot more than a pitch in front of you. Membership comes mostly through referral, so if you would like to see companies this way, write to the Genesis team at info@genesisbh.net or visit www.genesisbh.net.
This article is for general information only and does not constitute investment, tax or legal advice.
Genesis is an invitation-only investment and social club with chapters in Miami, New York/New Jersey, and Los Angeles.
