How Should a Founder Verify an Investor's Authority to Make an Investment?
Short answer. Ask who has final approval, what process the investor must follow, and who can sign the investment documents. Confirm those answers directly with the authorized person or entity representative, and document any conditions before relying on a commitment. Talk with your attorney about the appropriate records and agreements.
Confirm who can approve the investment and who can bind the investor. A promising conversation may involve someone with influence but without final approval. Before planning around a commitment, map the decision path, speak with the person who can act, and get the process in writing.
Map the Approval Path
Ask the prospective investor how decisions are made. Does one individual decide, or must an investment committee, board, family group, trustee, or partner approve? Is approval needed for this specific amount or type of investment? Are internal reviews, conditions, or signing steps still outstanding? The answers should describe a process and its status, not general enthusiasm.
Identify each person's role. A family office executive may source and evaluate deals while another person has authority to approve or sign. A fund manager may need consent under fund documents. An entity may require more than one authorized signatory. Keep the tone matter-of-fact: you are learning the route to a valid commitment, not challenging the investor's status.
Confirm the Person Can Act
Ask to speak with the final decision-maker or, when appropriate, the person authorized to represent the investing entity. Confirm their name, title, entity, and transaction role. If another party must approve, ask how and when that approval will be obtained. When the investment depends on someone's authority, confirm it with that person instead of relying on a third party's description.
Request confirmation in a form suited to the transaction. This may be written approval, an entity resolution, a subscription document, or another record prepared by counsel. The required records depend on the investor structure and governing documents. Ask your attorney what is needed and have them review any representation about authority before you accept or rely on it.
Track Conditions Through Closing
Record the investor's approval status, outstanding diligence, any conditions, expected timing, and the next owner of each step. If approval is pending, mark it as pending in your internal planning. An email expressing interest does not show completed authorization or signed investment documents.
Clear records help keep the relationship constructive. Summarize conversations promptly, invite corrections, and check that the written terms match what both sides discussed. If the proposed investment raises legal or tax questions, consult your attorney or CPA. Credibility comes from disciplined communication and respect for the investor's governance.
Read next: What information can help confirm that a prospective investor has funds available? and What should a founder learn about an investor's past deal behavior? and What should a company agree on before paying a fundraising success fee?
The whole point of building an investor funnel is to build your credibility and authority.
Sources: Capital Raising. Informational only, not financial, legal or tax advice.