Our ED Reflects

Startup Due Diligence: A Step-by-Step Guide

Investing in a startup is exciting, but carries inherent risks. Thorough due diligence minimizes that risk by providing a comprehensive understanding of the business and its potential. The guide below outlines key steps for conducting effective due diligence.

Startup Due Diligence Checklist

1. Pre-Diligence:

• Define goals & scope: Clarify investment thesis and deal stage, decide timeframe.
• Gather resources: Secure data room, leverage experts, prepare reference checks.

2. Information Gathering:

• Founders & Team: Assess experience, passion, and cultural fit via resumes and interviews.
• Market & Competition: Analyze market size, growth potential, and competitive landscape.
• Product/Service: Evaluate value proposition and unique selling points.
• Financials: Review historical financials, projections, and key metrics.
• Legal & Regulatory: Assess compliance, contracts, intellectual property, and potential legal risks.

3. Analysis & Validation:

• Critical evaluation: Verify claims, identify red flags.
• Modeling & forecasting: Build your own models, validate projections.
• Industry benchmarks: Understand performance context.

4. Communication & Negotiation:

• Ask questions: Address concerns with founders and seek clarification.
• Negotiate terms: Reflect risk and potential, consider industry standards.
• Maintain transparency: Share findings/concerns with co-investors.

Best Practices:

1. Adapt checklist based on your investment thesis and deal stage.
2. Focus on critical information; avoid information overload.
3. Foster open communication and collaboration with founders.
4. Protect sensitive information throughout the process.
5. Maintain a clear record of your findings and the due diligence process.

Remember: Due diligence is an iterative process. Be prepared to revisit information and revise your analysis as you learn more. Following these steps and best practices will equip you to conduct thorough, efficient, and effective due diligence for your angel investments.

Happy investing! ??