Most vendors check a new client's website and maybe their LinkedIn page. Very few check the founder behind the company. Yet for small and early-stage businesses, the founder's history is often the best predictor of how a partnership will end.
You don't need an investigator to do a first pass. Here is the checklist we use, broken into six steps of about five minutes each.
- Rebuild the timelineWrite down every company and role from the founder's public profile, with dates. Look for overlapping CEO roles, very short tenures and companies that appear in one profile but not another.
- Match brands to legal entitiesSearch the state business registry (Secretary of State) or a database such as OpenCorporates. Check which entities are active, dissolved or suspended, and who is listed as an officer.
- Read complaints - and the responsesLook at the Better Business Bureau profile and review sites. One complaint means little. What matters is the pattern, and whether the company responds and resolves issues.
- Search court recordsFederal cases can be searched through PACER; many states have their own online court portals. Collection suits from vendors and contractors are especially telling.
- Test the big claims"Two exits." "Eight figures in revenue." "Backed by a famous investor." Look for press coverage, filings or statements from the other party. A claim isn't a fact until someone other than the founder confirms it.
- Talk to past vendors, not just customersCustomers see the product. Vendors see how bills get paid. If you can find an agency or contractor who worked with the founder before, ask them directly.
Look for patterns, not perfection
Companies fail for honest reasons, and every business collects a few bad reviews. The warning sign is repetition: several closed companies, several unpaid partners and the same story told each time.
Red flags worth a second look
- A new venture launched while the previous company is still winding down.
- Revenue or exit claims that can't be found anywhere outside the founder's own profile.
- Multiple entities with similar names and unclear relationships.
- Vendor lawsuits or liens filed against past companies.
- Reluctance to put the contracting entity - or a personal guarantee - in writing.
What to do with what you find
If the record is clean, you can sign with more confidence. If it isn't, you still have options: ask for a larger deposit, shorten payment terms, bill by milestone, or require a personal guarantee. And if the warning signs keep piling up, walk away. The contract you don't sign can't go unpaid.
Already working with a client who shows these signs? Read our seven warning signs a client won't pay. For an example of what a founder's record can reveal, see our latest special report.
This article is general information, not legal advice. Public records vary by jurisdiction; verify anything important with the original source.