A framework for an initial and quick investment analysis, Carofin has identified “Seven Questions” to efficiently guide a prospective private investor to a basic, but more comprehensive understanding of an operating company. While not exhaustive, addressing these seven questions provides a solid foundation from which to conduct more detailed due diligence. The Seven Questions are:
- What does the company do?
- Who are the key managers of the business?
- What stage is the business and is the investment being offered appropriate?
- Who are the company’s customers?
- How is the product or service produced?
- How does the company make money?
- How will investors be paid back?
These seven key questions are used by Carofin to achieve a basic understanding of a prospective issuer of private debt, venture capital and private equity securities and for then conducting more comprehensive financial analysis, including due diligence.