1 Investor Due Diligence: Getting Your Ducks in a Row #DueDiligence SEEDCHANGE
Transcript
1. 1 Investor Due Diligence: Getting Your Ducks in a Row
#DueDiligence SEEDCHANGE
2. 2 Startups face a huge burden in todays economy, often
having to choose between funneling resources toward creating their
goods and services or managing the often complex accounting, tax
and financial strategy planning necessary to run a successful
business. ~ David Ehrenberg, Founder and CEO Early Growth Financial
Services
3. Kevin Smith Founder and CEO SEEDCHANGE
4. Investor Due Diligence NOT just the final hoop
4www.seedchange.com www.earlygrowthfinancialservices.com
5. Before you even think about reaching out to investors,
button up 5www.seedchange.com www.earlygrowthfinancialservices.com
Business entity Delaware C Corp Business model Scrubbed financials
Thoughtful projections Cap table prepared and clean Employee
agreements Partner agreements Customer agreements IP
6. 6www.seedchange.com www.earlygrowthfinancialservices.com
Gloves are off On-site All employees Vendors Customers Founder
background check Due diligence begins
8. Internal communication 8www.seedchange.com
www.earlygrowthfinancialservices.com No surprises Answer questions
Clearly explain pros and cons of investment Bringing team
up-to-date Document business processes Integrated team view
9. What do investors look at? 9www.seedchange.com
www.earlygrowthfinancialservices.com
10. Personnel review 10www.seedchange.com
www.earlygrowthfinancialservices.com Your people are your company,
so this is a priority for investors Relationships among founding
team members Resolve outstanding team issues
12. Market analysis 12www.seedchange.com
www.earlygrowthfinancialservices.com Opportunity size Validation of
initial assessment Trend analysis Barriers to entry /
competition
13. T R A C T I O N 13www.seedchange.com
www.earlygrowthfinancialservices.com User acquisition rates Sales
activity Distribution channels CAC (Customer Acquisition
Costs)
14. Full disclosure? 14www.seedchange.com
www.earlygrowthfinancialservices.com
15. Documentation: Required Documents Necessary documentation
and information for due diligence www.seedchange.com
www.earlygrowthfinancialservices.com
16. Corporate Records & Charter Documents Certificate of
Incorporation Articles of Incorporation (and amendments)
Certificates of Designations, Rights, etc. Bylaws Minutes of
directors' and shareholders' meetings Written consents of directors
and shareholders www.seedchange.com
www.earlygrowthfinancialservices.com
17. Security Issuances Company shareholders and option holders
(showing vesting & security exemptions) Outstanding options,
warrants, rights Registration rights for company's securities All
voting trust instruments, buy-sell agreements, voting proxies or
other shareholder agreements All permits and filings regarding
securities issued by company www.seedchange.com
www.earlygrowthfinancialservices.com
18. Material Agreements Obligations / payments in excess of
$10,000 Personal property leases Company liabilities Property /
asset related documents Loan or advance documents Employment
agreements Insurance policies Employee benefit plans Any judgment
by which company is bound Form of Proprietary Information and
Invention Agreements www.seedchange.com
www.earlygrowthfinancialservices.com
19. Intellectual Property Foreign and domestic patents and
patent applications Trademarks, trade names, service marks, domain
names or copyrights Proprietary processes Licensing agreements (to
and from) Third-party correspondence regarding potential
infringement of IP rights www.seedchange.com
www.earlygrowthfinancialservices.com
20. Disputes and Litigation Pending action, suit, proceeding,
investigation Allegations of company's infringement of proprietary
rights of others Labor agreements or actions www.seedchange.com
www.earlygrowthfinancialservices.com
21. Other Essential Documentation p21 Securities or ownership
interests in other companies Certificates of qualification from all
states or foreign countries in which company is qualified to do
business All licenses, permits or government authorization Companys
bank accounts, lines of credit, etc. Current or past officers,
directors, or key employees who own direct beneficial interest in
any competitor Powers of attorney executed by company
www.seedchange.com www.earlygrowthfinancialservices.com