Should angel investors rely on other investors' due diligence rather than doing their own?

Harry Stebbings · Oct 24, 2022

His biggest investing mistakes have all come from relying on someone else's judgment, and one should never do that

Even when the other person is amazing, the outcomes were his worst

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Guy Podjarny · May 24, 2023

The biggest mistake angels make when co-investing alongside VCs is underappreciating how different the two contexts are — a seed check is a tiny bet for an A/B-stage fund but may be an angel's primary position

For the VC it's a small option on the opportunity; for the angel it can be a core allocation, so the VC's diligence should be contextualized rather than relied on wholesale

Scope: applies especially when the co-investor is primarily a Series A or B firm writing a seed check

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Tom Hulme · May 8, 2024

Outsourcing discipline and due diligence to other investors is a massive trap, and part-time angels who assume someone else has done the work are often wrong

He fell into it himself; it is surprising how often nobody in a round has actually done the work

Scope: particularly applies to angels with full-time jobs

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Des Traynor · Jul 18, 2022

A small-check angel should skip diligence entirely and instead condition the check on a professional lead investor who will do the homework

With twenty minutes to decide and a $10-20k check, you cannot verify incorporation, cap table, bank balance or revenue quality yourself, so the only option is to outsource it to someone who does this for a living

46:10 Outsourcing diligence to a professional lead investor is the only viable option for small checks