What are the main sources of information for startup due diligence?

?? Startup Due Diligence ?? ?? Pitch Deck: Overview of problem, solution, team, and projections. Look for clarity and consistency. ?? Market Research: Analyze market trends and potential. ?? Business Plan: Detailed roadmap and strategy. ?? Team Background: Assess the founders' expertise. ?? Legal Documents: Contracts, IP, and regulatory compliance. ?? Financial Records: Profitability, burn rate, and cash flow. ?? Customer References: Validate product-market fit. ?? IP and Technology: Evaluate intellectual property. ?? Product Demo: Experience the product firsthand. ?? Traction Data: User growth, engagement, and retention.

A pitch deck should be concise yet comprehensive. It must succinctly present the product, the problem it addresses, and the competitive advantage it holds. It should provide insights into the market size and identify existing gaps, outlining the target customer base. The deck needs to include realistic projections and specify the allocation of funds. If available, incorporating customer testimonials can add substantial value.

A pitch deck is a sales document and you should treat it as such. This is the startup's framing of the narrative and so you must consider what is not being said. Also remember that it is good to get a read on the founders when they present the deck. See how comfortable they feel in the information they are presenting.

I will shortly admit something I've never heard another say. To qualify: over 10 years- met startup teams (pre-seed to B SEA) guess over 500 times. During meeting of course team presents deck. I've also read via email, Linkedin, WA, etc , hundreds more decks . Let's say approaching 1000 for fun! If I read deck alone, I skim quick to find TEAM, then read their linkedin, then any other background check. Next: what is problem / solution, - is it interesting. Then-comp, PMF, etc... Live pitches- my attention is 80% listen/observe team ( fibs, rudeness/ lack of humility-NO), 20% deck. I'm looking for Character, Communication Agilty, Tact, Passion, Vision, Flexibility. Then I'll see a deck. If I belive in them I may even help on the deck.

Incluir las fuentes verificables de las afirmaciones contenidas en el pitch deck, un asterisco con una nota al pié o un slide final. La capacidad de hacer una buena investigación de mercado refleja la profundidad del conocimiento del mercado de la startup.

Slight disagreement on financial models Yes, assumptions should be defensible and so should unit economics Startups especially early-stage should not bother with such things as sensitivity analysis There are too many variables in reality and everything is moving at a fast pace Financial models pre-Series A should be simple and for discussion purposes only. No investor will hold a founder accountable for not meeting their financial projections

The financial model helps me understand the philosophy of building a startup organization. I can assess the founders' competence to scale the business. I am interested in what key roles and positions they want to fill, when, and why they are essential to them. Analyzing the financial model from this angle also allows me to assess the organization's readiness to consume the capital that will come in after the round closes. Many startups are not ready to start using it effectively right away. They often need several months to make the necessary organizational changes.

?? Financial Model in Startup Due Diligence ?? ?? Historical & Projected Data: Analyze revenue, expenses, and cash flow trends. Assess scalability and growth potential. ?? Assumptions & Sensitivity: Scrutinize underlying assumptions. Test model against various scenarios. ?? Unit Economics: Understand customer acquisition cost (CAC) vs. lifetime value (LTV). Ensure healthy unit economics for sustainability. ?? Valuation & Exit Strategy: Evaluate startup's valuation and exit plan. Assess potential returns for investors. ?? Data Accuracy: Verify data sources and accuracy. Look for inconsistencies or discrepancies.

I find finmodel to be a tool for valuation. Depending how early stage, tbh the fin model, or trying to DCF it, may be pointless. I worked public markets before early stage VC. The former is a quantitative exercise. The latter art. If we pretend there are 2-3 years of historicials, and the funding spend is outlined clearly to affect just a few areas, such as 1-2 new products, a new market per year, payroll growth, etc.,, then this is reasonable. As a standalone doc it can demonstrate some stability and growth. For Valuation, however, which I'm finding more interesting atm, similar stage/industry/geography comps are much more relevant, though final nego is about demand/supply -some VCs need to buy certain sectors; then its a beauty contest.

Debe incluir escenarios que puedan modificarse para estimar las diferentes variaciones de crecimiento; ventas y gastos directos e indirectos. Estos escenarios permiten ajustar a lo largo del tiempo si las variables introducidas eran acordes con la evolución de la startup.

Always when conducting a due diligence on a startup that we are looking to invest in, we talk to their customers. We don't just look at customer feedback. We ask the founders for customer intros, we hop on a call and we dig deeper into: 1. Their pains; 2. How the startup is solving them; 3. How they have been solving the pains prior using the startup's product; 4. What is their first-hand product experience feedback.

The customer exp. should be 360. It begins when they first click a chat bot "hello". How long before they are replied to. Are they replied to competently. Are they smoothly funneled to a Sales Consultant? The next part most peope understand well, so I will mention the after-sales care. I do so, because at one point, at a startup where I worked, there was a bit of neglect on after-care. We were growing so fast and so excited to get the next client we often forgot about older quiet clients. We learned, painfully, that some of these quiet paying clients actually disliked the product/service, and in some cases stopped using it. They were just too busy to tell us. When we learned (amateur-hour) was during our enthusiastic outreach for renewal.

Si se detecta y se incluye una temprana segmentación de los potenciales clientes en relación a las ventas, es una se?al estupenda de que se está empezando a conocer el encaje producto-mercado.

There is nothing worse than engaging with a company that doesn't know its target customer. As a founder, you must paint a clear picture of your ideal customer and back it with data to demonstrate their interest in your product and pricing structure. Ensure that all this information is substantiated with hard data, statistics, as well as qualitative insights from surveys, interviews, and focus groups.

The essential thing here is just to have it and have it organized in a data room. Treat the data room like a garden that you update and maintain on a regular basis. And when you share a data room, add a time limit — helps you tell who is interested and who is not.

As a VC you have a great network of existing portfolio company CEOs. You can ask 1-2 to meet with the CEO of your potential investment. They might give you feedback that is complementary to what your investing team sees.

I think this is the most relevant. As a broker and bridge to capital I often work with founders to get them ready for their growth. At this stage core issues like people skills, brand assesment, product placement, brainstorming attitude, should emerge to point out the real team capacity to adapt to future market conditions. These days information is available to everyone, is the people management inside a startup that counts the most.

Founders, as you seek venture capital funding, remember the importance of startup governance. Beyond the flashy pitch deck, a robust governance structure attracts investors. Prepare seed funding due diligence meticulously, engaging with seasoned investors for insights. Engage with fellow entrepreneurs and learn from their experiences. Use this checklist to build a data room: 1. Investment Package 2. Corporate Structure 3. Agreements 4. Real Estate 5. IP and IT 6. Labor Agreements 7. Compliance 8. Operational Data 9. Litigation 10. Financials 11. Taxes 12. Market Overview 13. Other Transparency and readiness are key to attracting top-tier investors. Best of luck! ?? #FounderAdvice #StartupGovernance #DueDiligence #VentureCapital ????

Other investors are a great source of information about the company. From them, you will learn what it looks like from the inside, how the founders work, what they have achieved, and what they have not. You won't learn everything in one meeting, especially if you haven't done business with a particular investor. In new relationships, sometimes it takes several interactions to arrive at relevant information. It's especially worth talking to the first investors of a company. They are the source of most information about founders' successes and failures.

Depending on the stage, having sound financial statements (in some cases, audited financials will be required) can be the acid test to validate the accuracy of what you've presented in your pitch deck, presentations, and meetings. Ensure your accounting is precise and on point!

Sometimes when conducting due diligence, we include technical due diligence as well. Our goal is to asses the technical state of the product and get a good picture of where it stands in terms of tech fundamentals, security, current development, tech stack and product roadmap.