Pre-investment Interviews

This information is provided for general informational purposes only and should not be relied upon as legal interpretations by the Office, shall not supersede any part of the Florida Statutes or Florida Administrative Code, and does not constitute legal or financial advice. The Office does not endorse any third-party or guarantee the accuracy of any third-party information linked to or referenced herein.

When you invest in a small business, you are entering into a potentially long-term relationship. As part of your research, conducting a pre-investment interview can help you learn more about the company and the company’s founders or principals before deciding to invest. Having a mutual understanding and good communication can help both parties better manage expectations and understand the terms of the investment.

Considerations

Consider the following before a pre-investment interview:

  • Do you personally know the company founders, managers, and directors?
  • Is the company local?
  • Do you have any experience or interest in the company's particular market?
  • Prepare to communicate your expectations.


Consider asking the following questions in a pre-investment interview:

  • "What stage of development is the company in?"
  • "What does the company's competition look like"?
  • "What is the experience and background of management?"
  • "How long has the company been in business?"
  • "Has the company conducted previous capital raises?"
  • "How does the company plan to use the money that is raised?"
  • "How long does the company anticipate it will take to reach this goal?"
  • "Who in the company will be managing investor relations and how can I contact them?"
  • "How often will your company be communicating and meeting with its investors?"
  • "Will the investors have any voting rights in the decisions of the company?"
  • "Does the company expect it's investors to be on the board of directors or have a mentorship role?"
  • "How will the company consider the interest of its shareholders?"
  • "How much debt does the company currently have?"
  • "Does the company intend to raise more capital in the future?"
  • "Has the company considered the future implications of selling its equity?"


Further considerations prior to making an investment:

  • Did the issuer provide financial statements and, if so, what do they tell you about the business?
  • Are the financial statements independently audited or reviewed?
  • Do you suspect the company could default on any debt?
  • Are the terms of the offering in alignment with your financial goals?
  • Are the claims and expectations made by the company reasonable?
  • Do you understand the terms of the offering?
  • How reasonable is the issuer's reliance on a particular technology, customer, product, or natural resources claim?
  • Do you want to invest alongside the other owners or investors?
  • If the securities you are considering purchasing have transfer restrictions, when, will and how will the restrictions be lifted?
  • Because you may not be able to resell your investment easily, are you comfortable holding it indefinitely?
  • If the company were to fail, could you afford to lose most or all your investment?

Investors should be aware that early stage/startup companies often have limited historical and financial data available. This is especially true for companies who have yet to launch their operations. Investors may only receive a business plan and speculation about how the company will perform. However, investors should still be aware of the information they are entitled to receive and consider consulting legal or financial counsel to assist in due diligence.

Private investments may be pitched as a unique and exclusive opportunity for investors to 'get in early' on an up-and-coming entity. Investors should be careful not to succumb to high-pressure marketing tactics or popular sentiment. Investors are expected to conduct their own due diligence with the understanding of the high potential risk involved with making a speculative investment. Investors should always make sure they are fully informed prior to making any investment decisions and never invest more that they are willing to lose.

Resources