How to Check if a Startup is Legit: 15-Point Verification Checklist

The Verification Imperative

Every year, angel investors lose millions to startups that look legitimate on the surface but are built on lies, exaggeration, or outright fraud. The good news: most lies are catchable if you know where to look.

This checklist gives you a systematic way to verify every major claim in a pitch before you write a check.

The 15-Point Verification Framework

Section 1: Team Verification (Points 1-5)

1. Employment History

Run every founder's LinkedIn through verification:

• Cross-reference claimed employment at claimed companies
• Check dates - do they align with the startup's founding date?
• Look for gaps that weren't explained
• Check for "founder" at previous companies - were they actually founders?

Red flags:

• Claims to have been "VP Engineering at Google" but was actually "Contractor"
• Founding date doesn't match when they "left" their previous job
• Significant gaps with no explanation

2. Education Claims

Verify degrees claimed on LinkedIn or in bio:

• Most investors don't check. Fraudsters know this.
• Cross-reference with company alumni databases
• For degrees from lesser-known schools, ask for transcripts

Red flags:

• "MBA from Harvard" that can't be verified
• "Computer Science from Stanford" but no LinkedIn presence from that era

3. Previous Startup Outcomes

If founders claim previous exits or successful startups:

• Look up the actual exit (acquisition price, acquirer)
• Check if they were actually involved (and not just an early employee)
• Search court records for litigation involving the company or founders

Red flags:

• Claims a $10M exit but was actually a $500K asset sale
• Was "founder" but had no equity (just an employee)
• Previous company had undisclosed lawsuits

4. Social Media Patterns

Analyze founder's public presence:

• When did they start posting about this industry?
• Is their "expertise" recent or long-standing?
• Do they have a following that matches their claimed expertise?

Red flags:

• Started posting about AI in 2023 but claims 10 years of AI experience
• Following/followers ratio suggests purchased followers
• Very sparse online presence for someone with claimed expertise

5. Network Connections

Check who they know and who endorses them:

• Do industry experts they claim to know actually know them?
• Are their advisors actually active in the space?
• Do LinkedIn connections match their claimed network?

Red flags:

• "Advisor" is listed but has no real relationship with founder
• Claims to know prominent investors but no evidence of relationship

Section 2: Product Verification (Points 6-9)

6. Technology Claims

If they claim proprietary technology:

• Check for patents (USPTO database)
• Check for open-source contributions (GitHub)
• Look for published research or technical blog posts

Red flags:

• Claims "proprietary AI" but uses the same LLM as everyone else
• No GitHub but claims strong engineering team
• Patents are "pending" but have been pending for 3+ years

7. Product Launch Claims

Verify launch claims:

• Is the product actually live?
• Can you sign up and use it today?
• What's the App Store / Play Store rating and review count?

Red flags:

• "Launching next month" but website shows "coming soon" for 6 months
• App has 0-5 reviews but claims "thousands of users"
• Product requires invite code but no evidence of anyone using it

8. User/Traction Claims

The most common lies:

• "100,000 users" = check app store, SimilarWeb, BuiltWith
• "Growing 30% MoM" = ask for specific numbers, then verify
• "Featured in TechCrunch" = search for the article

Red flags:

• Claims 100K users but website traffic shows <10K monthly visits
• "30% MoM growth" but no cohort data to support it
• "Featured in Forbes" but you can't find the article

9. Revenue Claims

Verify revenue by asking for:

• Bank statements (redacted is fine)
• 3rd party payment processor reports (Stripe dashboard screenshot)
• Customer invoices (redacted)
• Tax returns if reasonable

Red flags:

• Refuses to show any documentation
• "Can't share due to NDA" (red flags about revenue should be shared)
• Revenue claims don't match employee count or infrastructure spending

Section 3: Financial Verification (Points 10-12)

10. Cap Table Verification

Request the full cap table:

• Who owns what percentage?
• Are there any unusual terms (large option pools, preferred dividends)?
• Are there any shadows or side agreements?

Red flags:

• Founder claims 60% but actual cap table shows <40%
• Massive option pool (30%+) created before seed round
• "Friendly investors" who are actually on different terms

11. Burn Rate Math

Verify burn rate makes sense:

• Monthly burn should match employee count, office, infrastructure
• If they claim $50K/month burn with 10 employees, the math doesn't work

Calculation:

Estimated burn = (Salaries × 1.4) + Infrastructure + Office + Marketing

Compare to claimed burn rate.

Red flags:

• Burn doesn't match headcount
• "Efficient burn" but spending on things that don't make sense
• Burning cash but no clear path to revenue

12. Valuation Math

Check if valuation makes sense:

Early stage valuation benchmarks:

If they're raising at $20M pre-money with $100K ARR and no traction, that's aggressive.

Red flags:

• Valuation 5x higher than comparable deals
• Uses circular logic ("we're worth more because we're growing fast")
• Can't explain why valuation is what it is

Section 4: Legal Verification (Points 13-15)

13. Litigation Search

Search for the company and founders in:

• Federal court records (PACER)
• State court records
• SEC filings
• BBB complaints

Red flags:

• Undisclosed lawsuits from former employees or customers
• SEC investigations or warning letters
• Pattern of complaints that match the founder's behavior

14. Regulatory Compliance

Check if their industry requires licensing:

• Financial services, healthcare, crypto have specific requirements
• Are they operating in a gray area they haven't disclosed?

Red flags:

• Operating without required licenses
• "Gray area" they plan to "navigate later"
• Regulatory risk they haven't disclosed to investors

15. IP Assignment

Verify IP was properly assigned to the company:

• Did founders sign IP assignment agreements?
• Is any IP still held personally or by a previous employer?

Red flags:

• Core technology licensed from founder's previous company
• No IP assignment agreements on file
• "Work made for hire" agreements not properly executed

The Soloanalyst Verification Report

Rather than verifying manually, run the startup's URL through Soloanalyst's verification engine. We cross-reference:

• Founder claims against 50+ public data sources
• Technology claims against patent and GitHub databases
• Traction claims against SimilarWeb and app store data
• Social proof against social media databases

Get a complete verification score and red flag report in 3 minutes.

Run a free verification report →

The Red Flag Summary

The 30-Minute Verification Routine

Minute 0-5: LinkedIn sweep (employment, education, network) Minute 5-10: SimilarWeb / app store verification Minute 10-15: Court and SEC database search Minute 15-20: Technology claims check (patents, GitHub) Minute 20-25: Cap table request and review Minute 25-30: Run Soloanalyst verification report

Key Takeaways

1. Most lies are catchable - founders rarely lie perfectly
2. Start with LinkedIn - it's the foundation of most verification
3. Cross-reference everything - single source of truth doesn't exist
4. Revenue is the hardest to fake - push for documentation
5. Burn rate math never lies - if the math doesn't work, something is wrong
6. Soloanalyst automates 80% of this - run the URL, get the report

This checklist is part of SoloAnalyst's due diligence framework. For automated verification, try SoloAnalyst.