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From 1993 to 2001 IDE exercised due diligence on Companies presented to it by it's members. This due diligence consisted of comparing the terms offered to investors to the IDE database of the past investments and identifying 'characteristics of failure' in the current business plan or private placement memorandum of that Company.
The success ratio in doing this was 100%. No investment opportunity from 1992 to 2001 that failed to meet IDE due diligence parameters ever paid a profit to investors that investment opportunity. This amazing (ever to us still) success ratio kept IDE members from participating in over $9 billion in investor losses; losses suffered by others, but not IDE members.
The statistical studies from that time period were...alarming.
Approximately 40% of the 3,000 opportunities reviewed by IDE were fraudulent, and 'outright', 'legal' or 'legitimate company' scams.
Approximately another 40% were 'other peoples money' investments where the investors took the risk, and the Company principles took the rewards. 'Other peoples money' investment structures suffered the same near 100% failure rate as the scams themselves. The remaining 20% consisted of honest companies run by principles that were sadly lacking in business expertise.
In all from 1992 to 2001 IDE tracked a 99.8% (yes a ninety-nine, point eight percent) Company failure rate. Not ONE of these companies had an independent verification of the elements of their business plan like the Audited Business Plan noted on our Group Protection page.
To be fair four out of twelve investing opportunities that did meet IDE investing parameter, mostly from 1998 to 2000, also failed. Sadly, good terms, honest management, and investor oversight, does not necessarily translate into a successful Company. But in nearly every case the failure of these companies was attributable to the stock market collapse and the retrenchment of second stage financing for companies.
This has given rise to the IDE terms that insist on financing adequate to take a company into Stage Three, or into net profitable status, and risk to the independent studies to determine how much money is necessary to achieve this goal.
With the Audited Business Plan concept in place IDE members no longer need worry about the 100% failure rate of scams, and 'other peoples money' investments. Those promoting such investment schemes will disqualify themselves by refusing to submit to an independent verification of their business plan.
Since scams and badly structured investments now disqualify themselves the previous IDE due diligence methods are now obsolete.
Nonetheless are some links to typical scams from that period, presented fro illustration purposes on how to spot such scams, which are still successful in preying on investors who are not IDE members.
SAMPLE INITIAL DUE DILIGENCE REVIEWS
Gecko Holdings
Pre-IPO, Direct Public Offering (DPO), Limited Liability Partnership (LLP), Limited Liability Corporation (LLC), Seed Money Investment, Bridge Loan, Mezzanine Financing, Private Stock, Secured and/or Collateralized Loan. INVESTIGATE THE FUNDAMENTALS BY JOINING
Investor Data Exchange, Inc.
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