drive-by investing investment & finance definition

A relatively new term that came into common usage during the technology and venture capital boom in the late 1990s. It refers to the practice of venture capitalists (VCs) agreeing to fund start-up companies without doing any substantial due diligence to verify whether the company’s product and management is worthy of receiving an investment. During the technology boom, VCs were anxious to fund the next big company before their competitors. Drive-by investing occurred because they believed that they didn’t have enough time to do their due diligence.