Art by Josh Brill.
July 14, 2022 6:00 AM PDT

In June, the founders of Duplo, a Nigerian fintech company started last year, received some disappointing news. Insight Partners, a New York–based private equity and venture capital firm, in the spring had signed an offer to lead the company’s seed round, a step that would have cemented Duplo’s relationship with one of the biggest private investing firms in the world. But after Insight did its reference checks, the firm balked—and pulled the term sheet, according to two people familiar with the talks.

Such an outcome, nearly unheard of a year ago, is becoming more common. No longer in a rush to beat out competitors, investors are taking longer to close deals and spending more time vetting a startup’s business. While scrapped or renegotiated deals may leave founders feeling burned, investors say the wariness is healthy, because the deeper research can identify firms with management problems or a product that likely won’t succeed.

“2022 has certainly seen the big return of due diligence,” said Matt Turck, a partner at FirstMark Capital. “Frankly, it’s been really refreshing.”

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