Primary source

A document that originated outside the transaction and was created for some purpose other than persuading you - bank statements, filed returns, signed contracts, public registers.

Example

Twelve months of unredacted bank statements, rather than a summary of receipts prepared by the seller's accountant.

Important

Looking official is not the test. A polished export from an accounting system is still something an interested party produced and could have edited.

Related terms

• Independent verification — Confirming a claim against a source that was not produced by, and has no stake in, the transaction - a bank statement, a public register, a counterparty, a regulator.
• Management representation — A statement made by the people selling or running the thing you are examining, whether spoken, written in a deck, or set out in a document they prepared.
• Proof of cash — Totalling the cash actually received over a period and comparing it with the revenue reported for the same period, to see whether reported sales turned into money.

Lessons that explain it

• The right expert on one call can change a diligence conclusion — An expert bench is a set of people with deep knowledge in your focus areas - operators, engineers, clinicians, lawyers - who can help check claims quickly. It is built before it is needed and treated with respect. (9 min)
• The customers you find yourself tell you more than the ones you are given — Customer calls are the most direct evidence of demand. They are most useful when they ask about past behaviour and include customers the company did not choose. (10 min)
• A market is the customers you can name, times what they will pay — Commercial diligence tests market claims by building them from countable customers and realistic prices, then checking the parts the company can actually reach. (10 min)
• Spend the first meeting listening for what is specific — A first meeting is for finding out whether the opportunity fits your thesis and whether the founder's claims are specific enough to check. Structure it, ask for facts, and leave with a clear next step. (11 min)
• What you were told, what you inferred, and what you checked — Almost everything that later turns out to be wrong was never actually verified - it was assumed, because it arrived alongside things that were true. (10 min)
• References you chose tell you more than references you were given — Checking the people behind an investment means verifying claims, speaking to sources they did not nominate, and asking questions specific enough that a vague answer is itself informative. (11 min)

All 578 terms in the Investing glossary