Thinking about preparing for due diligence?
Due diligence is all about process—it’s about finding out what goes on behind the business’s closed doors. Have there been lawsuits, audits of the company’s financial, management team background checks, inspections of facilities, inventory confirmations, etc. – due diligence is all about finding out if there are any issues or problems which can harm the company.
The operative word here is “process.” Due diligence is, as we all know, a necessary exercise for any transaction, and it is as important in any venture capital deal in private undertakings to raise funds.
The key reason why entrepreneurs hate the due diligence process is that it is laborious and time-consuming. In addition the process sometimes brings a young startup to a virtual halt by holding up fundamental business while attention is diverted to providing necessary information. But much can be done to ease this process.
Due diligence is defined as “the complete investigation and analytical process that precedes a commitment to invest.” It comes in two forms. The initial due diligence is by far the simpler one of the two, and it is relatively pain free to most entrepreneurs. A potential investor examines the company to make sure an investment in it meets the firm’s own criteria—investment size, industry, stage of development, rough valuation, conflict with investee, etc.
In this e-book we discuss the important aspect of due diligence. By reading it, you should gain an understanding of:
- The importance of process in undertaking due diligence
- Why due diligence is a significant piece of work for potential investors, and how they go about seeking the information they need
- Key areas to which investors look to obtain their due diligence information
- What investors see that would lead to scepticism for their planned investment
- The role that due diligence plays for the entrepreneur as he seeks investment dollars to grow his business