All we are saying is give due diligence a chance in 2023

Unfortunately, FTX is lone the latest successful this enactment of failures

Looking back, 2022 was rather the twelvemonth for immoderate investors and not successful a bully way. Mistakes made successful the roar play of the past mates of years led to galore write-downs, but the astir egregious illustration of abysmal investing practices this twelvemonth was FTX, the bankrupt and disgraced crypto exchange.

In fact, portion we wrote this, Sam Bankman-Fried, the company’s co-founder, was being extradited from The Bahamas to the U.S. wherever helium faces 8 transgression charges. In the past fewer months, his investors simply watched arsenic the company’s worth evaporated from $32 cardinal to zero successful nary clip flat. Like the stone set Talking Heads, they mightiness good person asked themselves, “Well, however did I get here?”

Well, 1 large crushed was due to the fact that FOMO often replaced owed diligence. For a while, the V successful VC appeared to stand for “vibes” — founders’ vibes seemingly became much important than their products.

Unfortunately, FTX is lone the latest successful this enactment of failures. We tin revisit companies similar WeWork and Theranos, oregon adjacent look to the database of billionaires and wannabes lining up to beryllium part of the $44 billion disaster-in-the-making that Elon Musk’s Twitter concern appears to be. Even Musk himself tried desperately to get out of the woody earlier yet closing it successful October.

According to Axios exertion Dan Primack’s Pro Rata newsletter past week, portion immoderate investors look to deliberation Musk has done a tenable occupation of reducing costs, others are disquieted however they’ll explicate their engagement to their concern committees. Maybe they should person thought astir that before they threw their wealth astatine the deal?

This is each indicative of a wider occupation successful investing these days. We don’t privation to overgarment the full manufacture with the aforesaid brush, but it is just to accidental that immoderate investors stopped being cautious due to the fact that they felt getting successful enactment for the latest shiny happening was a amended idea.

Clearly, investing should beryllium astir getting to cognize the team, checking the books (to the grade possible) and ensuring you unit trial the idea. You should ne'er beryllium signing checks due to the fact that each the chill kids are doing it — that is ne'er a dependable attack to investing millions of dollars.

We spoke to a fewer investors to get an wrong look astatine however owed diligence and investing practices person faltered successful the caller past, and if investors who whitethorn person fallen prey to chasing the adjacent large happening would larn thing from this year’s mega mistakes.

Have we learned anything?

There are respective issues astatine play here, and the task capitalists we spoke to stressed that immoderate investing firms (and investors) person to commencement being much disciplined, particularly erstwhile they’re doling retired idiosyncratic else’s money.