Balance sheets and income statements are important to understanding a company. But they do not tell the entire picture. They don’t tell you if the team is solid. They don’t tell you if the product is any good. They don’t tell you if the market is big. And they don’t even tell you about all the costs and they don’t tell you about all the liabilities. So you have to dig deeper and understand what is really going on before putting your capital at risk. That is called due diligence and it is critical to investing. And looking out for liabilities that aren’t reported on the financial statements is an important part of that.
Fred Wilson has been a venture capitalist since 1987. He currently is a managing partner at Union Square Ventures and also founded Flatiron Partners. Fred has a Bachelors degree in Mechanical Engineering from MIT and an MBA from The Wharton School of Business at the University of Pennsylvania. Fred is married with three kids and lives in New York City.