Credibility Can't Be A Substitute For Diligence
I read this piece about the collapse of CaaStle, and one point stuck with me: credibility can’t be a substitute for diligence.
A founder can have a strong track record. The company can have prominent investors, impressive growth numbers, and a valuation that seems to validate the whole story. None of that changes the need to verify what’s actually happening inside the business.
From a legal perspective, that means digging into the things that can look very different once someone starts asking questions.
Who actually owns the company’s IP? Do the contracts say what everyone thinks they say? Are employment arrangements properly documented? What liabilities exist? Do the corporate records match the story being presented? Are there change-of-control provisions or other obligations that could affect a financing or acquisition?
Don’t assume something is wrong. But we know it’s better to be informed and prepared, than be caught off guard.
There’s a lot more to this article—including some interesting discussion about what “ground-truth diligence” should actually look like.
Worth a read if you’re involved in investing in, acquiring, or building a startup.
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