To truly understand a potential financial partner, the Chomps team went beyond the supplied references. They found a founder whose company didn't succeed under the PE firm's investment. His positive review of the partner's character, despite the negative outcome, provided the most powerful signal of trust.

David Cohen of Techstars advises founders to request references from a VC's failed investments. This reveals how an investor behaves during difficult times, providing a more honest assessment of their character and support level than speaking only with successful founders.

Anduril's COO highlights a dangerous trend of "wildcat" secondary market brokers selling access to company shares they don't possess. These deals often involve multiple layers of SPVs with hidden fees. He warns that many retail investors will discover their shares don't exist during a major IPO, leading to significant financial losses.

After raising capital and forming multiple legal entities, the founder made the mistake of paying all bills from the parent C-Corp's account. This co-mingling of funds created a significant accounting mess, highlighting the non-negotiable need for separate finances for each entity.

Kevin Bartlett's story shows how relying on a handshake deal with a trusted, older partner led to a complete loss of his expected multi-million dollar exit. Good intentions and personal relationships are not a substitute for formal contracts when business stakes are high.

Unlike convertible notes, the SAFE (Simple Agreement for Future Equity) often lacks an expiration date or protective provisions. This loophole is reportedly being abused by some founders who take investment, fail to build, and then argue that SAFE holders aren't technically investors and are owed nothing.

An expert reveals two shocking statistics: 80% of new founders fail their first diligence attempt, and 85% of early-stage investors don't perform confirmatory diligence. This highlights a massive, systemic weakness and inefficiency in the startup ecosystem, creating significant risk on both sides of the table.

Unlike in tech where an IPO is often a liquidity event for early investors, a biotech IPO is an "entrance." It functions as a financing round to bring in public market capital needed for expensive late-stage trials. The true exit for investors is typically a future acquisition.

Meritech co-founder Paul Madera warns against relying on others for due diligence, even if the referral comes from a top-tier firm. Investors must personally understand the company's internal dynamics and its sector to make sound decisions. Outsourcing this fundamental work inevitably leads to bad investments.