It was the quintessential investor-entrepreneur lunch, the pitch resoundingly perfect, the potential riches laid bare.

It ended with a commitment and a hand-shake. The investors would take the lead in assembling a syndicated round for our Big Data analytics company, MediaBadger. Two weeks later, they decided to take on the whole round themselves. We signed a term sheet a few weeks after that. The team was gearing up.

Two months passed, and we had no investment. We were told to put hires on hold, though the money would come after just a few more hurdles were cleared.

Another month and silence, no returned calls or emails. Office space had been set-up, beta trial clients were told the software was imminent. The silence stretched painfully. Finally, we asked our lawyers to reach out to their counsel. The response was devastating: their lawyers had never heard of us and never received the three due diligence binders we had given the investor.

Fortunately, we had clients and revenues. But we could never scale to a big exit without bringing the software tools we’d developed into a robust product. We weren’t facing ruin, but we were facing an ugly truth. Our investor wasn’t quite the shining white knight we’d been promised. The lesson? Just as investors carry out due diligence on you, so should you carry it out them.

If we had asked around sooner, used our own skills and software tools, we would have learned a lot earlier the dismal track record of our supposed backers. Had we asked questions about their approach to investing, how they handled exits and managed their investments, we might have made a different decision.

It cost us a total of nine months and set our product development back a year. It was a harsh and uncompromising lesson. And it’s not easy to admit it publicly.

The available pool of capital in Atlantic Canada is fairly limited. In early 2012, there were some VC and angel investors and most startups relied on some degree of government funds. New Brunswick had made significant strides while the rest of the region stumbled along. In 2013, that has changed as some entrepreneurs have exited and are playing a part in the local investment ecosystem. Regardless, start-ups need be aware that they should ask questions. Talking with fellow entrepreneurs, I have heard that even a few who have been dangled a carrot from Silicon Valley and Toronto VCs have been stuck in precarious positions, with a few even turning down investments.

In the end, we recovered. We’ve raised some equity and low-cost debt. We are moving ahead with our software. We have clients and revenues to help carry on. If you are an entrepreneur looking to raise capital through early stage angels or VCs, you must do your due diligence. Interview your prospective investor. Ask around to the CEOs of the companies they have invested in. Do your reference checks. Ask around the local business community. If you have a good coach, get his or her views. Shop the term sheet for insights from others or potentially better investments. Be sure to understand the investors’ expectations of how they expect you to exit the business and when.

You will be spending a lot of time with them at board meetings and side meetings. How willing are they to help you find customers? Will they be there for follow-on rounds? Are they looking for more equity and control? If they want to control your business, what is their success rate to exit businesses they control? Do any of them have entrepreneurial experience themselves?

In Atlantic Canada, you need to do added due diligence around angel investors. A lot of the wealth here comes from traditional bricks and mortar businesses, or professions like medicine and law. If you’re a tech, cleantech or biotech startup, they may not understand the patience needed. They might not realize that paying software developers, engineers and scientists minimum wage won’t attract the skill sets you need to truly innovate and execute. The days of hiring skilled knowledge workers on the promise of a brighter future fizzled out with the dot-com bust of 2001.

Do your homework and make sure the purported angel has the funds to invest, and ask if you can work with them over the longer term. If either answer is no, then decline. Saying yes will cost you time and perhaps the death of your vision. We’ve actually declined an investor since; we did our homework only to discover their reputation was less than sunny. But we did our due diligence fast and quietly.

Don’t be afraid to do yours. If the money seems easy, there may be a reason why.

Giles Crouch is the Co-Founder and CEO of MediaBadger, a Halifax-based Big Data Analytics company, specializing in unstructured data from the open web for risk impact. See more at http://www.mediabadger.com.