Understand the risk before the pitch
A startup investment can lose its entire value and may be difficult to sell. The SEC's private-placement bulletin explains these risks in the US context. A convincing presentation or a well-known backer is not a guarantee of repayment, liquidity or profit. Suitability depends on the investor's circumstances and the actual instrument.
SEC private-placement risk bulletin
Test business evidence
Review customer demand, verified revenue, costs, cash runway and the assumptions behind projections. Distinguish a signed contract from a pilot, a pilot from a discussion, and revenue from funds raised. Ask how the product is delivered and which regulatory, integration or distribution dependencies could prevent the proposed plan.
Read the rights and decision process
Inspect ownership records, existing obligations, governance, disclosure rights and possible dilution. Obtain appropriate professional review for the relevant jurisdictions before a binding commitment. This framework is a way to organise questions; it does not rank a company, recommend a purchase or promise that completing a checklist produces a successful investment.