Due Diligence” is: a systematic collection & analysis of relevant business information to form an informed opinion on investing. an investigation of the business, its vision, current status, practices, processes and policies. an examination aimed at giving information for an investment decision using the principles of shareholder value analysis for evaluation.

1. ©
Due Diligence using POEM
By
Tomi Davies

2. ©
The POEM Framework®
VISION

3. ©
DD Definition & Purpose
What needs to be known? Where the information comes from?
“Due Diligence” is:
• a systematic collection & analysis of relevant business information to form an
informed opinion on investing.
• an investigation of the business, its vision, current status, practices, processes
and policies.
• an examination aimed at giving information for an investment decision using
the principles of shareholder value analysis for evaluation.

4. ©
Information Required
PROPOSITION
• Market
• Customer
• Sales
• Competition
• Pricing
• Profit Margin
• Regulation
• Suppliers
ORGANISATION
• Org Chart
• JD, R&R
• Processes
• Sales
• Marketing
• Procurement
• Logistics
• Customer
• Employees
• Technology
usage (Users,
Front & Back
end, Mobile &
Cloud)
ECONOMICS
• Current &
Historical
Performance
• Projections
(3-5 years)
• Balance
Sheet
• Cash flow
• Profit & Loss
MILESTONES
• Future
Strategy
• Business
Model
• Customer
Base
• Operation
Growth
• Stage
Funding
expectations

5. ©
The Entrepreneur
• What drives you?
• What is your personal mission in life?
• What is your vision?
• How do you align your team with this vision?
• What other stakeholder’s do you think you need to
involve in your vision?
• Where do you see yourself and this business in 10
years?
• Have you ever failed before? Share the story

6. ©
The Startup
• What problem is the startup solving?
• Looking to see how well the
entrepreneur can articulate the
problem, how well they understand
their customers
• How was the problem identified?
• Looking for any personal experience
• How big is this problem?
• Have market validations they done
• What are people currently doing to
deal with this problem?
• Do they understand competition?
• What is the startup’s solution to this
problem?
• How well can the entrepreneur
articulate their solution and does it
sound any different from existing
solutions
• What makes the startup’s solution
more interesting and unique?
• Can the entrepreneur pinpoint why
they are growing and why their
customers love them
• How does or will the startup make
money solving this problem?
• What are the monthly operating
costs?
• What are the chances of exponential
growth with some funding and
support?
• What is the most expensive part of
the startups operations?
• What are the heaviest cost points?

7. ©
Proposition
• What is the startup’s current market reach and
what is the potential market size?
• How has it been acquiring your customers?
• What percentage of the acquired customers are
retained over time?
• How does it engage its customers post purchase of
service/ product?
• How does it ensure customer retention?
• How many new customers are referrals from
existing customers?

8. ©
Organisation
• Who is on the startups leadership team and what
are their roles?
• Do they currently face any challenges/ bottlenecks
within the startup’s operations? What causes
them?
• How does their current capacity impact the
startup’s output as a business?
• Do they have any intention of increasing the
operational capacity and what are the projected
outputs?

9. ©
Economics
• Does the Startup have financial statements?
• Monthly Management Reports with details of monthly
cashflow (budget versus actual)?
• Balance Sheet and Cash Flow?
• Schedule of all off balance assets and liabilities with
rationale for their existence?
• Cash Collection and Debtor collection period (days)
from debtors known?
• Schedule of accrued payables or liabilities with
expected payment dates.
• Analysis of working capital utilization
Excel version of the Business Model / Financial Projections

10. ©
Post DD Knowledge
ECONOMICS
(FINANCIAL RETURNS)
MILESTONES
(EXIT POTENTIAL)
PROPOSITION
(MARKET STRENGTH)
ORGANISATION
(MANAGEMENT
DEPTH)
Product/Service Line
Unique Competitive Advantage
Market Growth Rate
Entrepreneurial Vision
Track record of success
Management depth
Satisfactory Revenue Strengths
Credible future profitability
Acceptable Cash needs
Good exit routes
Feasible –follow on investment
Satisfactory exit value

11. ©
Thank You!
Get in touch!
TomiDee TomiDee@TomiDee
td@tomidavies.com
tomidavies.com

12. ©
P: Material Contracts, negotiations and arrangements
• A list of customers of the
Company which have
accounted for ten per
cent or more of the
turnover (on average) of
the Company since the it
started operations
• Details of all negotiations
of material importance to
the Company to which
are currently in progress.
• Copies of
• agreements with key
customers and key
suppliers
• key joint venture,
partnership, or consortium
agreements
• key customers and key
marketing, agency,
distribution, manufacturing
or licensing agreements
• all agreements of material
importance to the
Company, not otherwise
provided elsewhere

13. ©
P: Intellectual Property
• A list of patents, copyrights
and trademarks, and any
searches relevant to such
items that have been done.
• Details of all intellectual
property used by the
Company, whether owned
by the Company or
belonging or given to third
parties (including details of
royalty receipts and
payments and material
licencing agreements)
• Any documentation relating
to the transfer to the
Company or any employee
of any technology
• Copies of Proprietary
Information and Invention
Agreements
• signed by key employees
and consultants.
• that contain any exclusions
from assignment to the
Company

14. ©
O: General Legal, Corporate and Compliance Matters
• Company structure (the
"Company") with details of
ownership
• Management and operational
structure chart of the
Company (i.e. business
divisions / key management)
• Full names and addresses of
each Director, secretary and
auditor of the Company.
• Minute Books of the Company
containing all shareholders'
and Directors' resolutions
• Details of the share capital of
the Company including: -
• the issued and paid-up share
capital, divided into classes,
where relevant
• the names and addresses of
all shareholders and beneficial
owners of shares in the
Company, together with details
of the number and classes of
shares held and any nominee
or trust arrangements
• details of any charges,
outstanding ownership or
other encumbrances relating to
the shares

15. ©
O: Technology
• Details of the core
technology of the
company including key
components of the tech
stack
• Highlight any areas
where the company might
be file for IP protection
• Highlight competitors/
competing technologies
and why the company’s
technology is unique
• Explain your software/
technology development
framework.
• Details of software
development
methodologies used
• How is versioning done
and approved?

16. ©
O: General Legal, Corporate and Compliance Matters
• A copy each of the
Memorandum and Articles
of Association, Certificate of
Incorporation and all
applicable charter documents
and by-laws of the Company,
including all amendments
made to date
• Details of any shareholders'
agreements or arrangements
or understandings (whether
legally binding or not) or any
other agreement, arrangement
or understanding relating to
the management of the
Company's business or the
Company's affairs
• Certificate of payment of
taxes for country of
incorporation and every state
and foreign country in which
the company is qualified to do
business.
• Tax returns with reconciliation
guidance to Financials

17. ©
O: General Overview of Assets
• Schedule of all freehold and
leasehold properties or
other material assets
setting details (including
details of valuation)
• Mortgage, charge, option,
right to acquire,
assignment, lien,
hypothecation or other
encumbrance over the
whole or any part of the
undertaking, properties or
assets of the Company
• Details and copies of any
material equipment leases
or rental agreements
• Details of any material
assets which are the
subject of any factoring
arrangement, hire-
purchase, conditional sale
or credit sale agreement,
management or
maintenance agreement,
together with copies of such
agreements

18. ©
O: Employees
• List of all persons employed
by the Company (including
persons who have accepted
but not yet begun
employment) showing name
of employee and employer,
date on which employment
began, job title, place of work,
length of contract, notice
period, salary and other
benefits (e.g. use of company
vehicles, medical insurance,
bonuses/commission
entitlements, options), age
and any other relevant details
• Copies of the CVs, external
references and employment
contracts for key personnel
• Standard form employment
contracts of full-time employee
• Employee turnover rate since
the company started if less
• Labour union participation by
employees (if any)

19. ©
O: Insurance
• Details of all insurances maintained by the
Company in respect of its business, assets or key
personnel,
• Details of significant claims under the Company's
insurance policies
• Details of subsisting claims against or made by the
Company under its insurance policies

20. ©
O: Compliance and Litigation
• Details and copies of all licences, consents,
permits and authorities held by the Company to
enable it to carry on its business
• Details of any significant claims or litigation made
by or against the Company, where significant
means claims exceeding or potentially exceeding
NGN 10,000,000
• Any consent decrees, injunctions, judgments, other
decrees or orders, settlement agreements or
similar matters

21. ©
O: Technology
• Details of the core
technology of the
company including key
components of the tech
stack
• Highlight any areas
where the company might
be file for IP protection
• Highlight competitors/
competing technologies
and why the company’s
technology is unique
• Explain your software/
technology development
framework.
• Details of software
development
methodologies used
• How is versioning done
and approved?

22. ©
E: Historical Financials
• Does the Startup have financial statements?
• Monthly Management Reports with details of monthly
cashflow (budget versus actual)?
• Balance Sheet and Cash Flow?
• Schedule of all off balance assets and liabilities with
rationale for their existence?
• Cash Collection and Debtor collection period (days)
from debtors known?
• Schedule of accrued payables or liabilities with
expected payment dates.
• Analysis of working capital utilization
Excel version of the Business Model / Financial Projections

23. ©
E: General Overview of Borrowings / Liabilities
• Details and copies of all
relevant documents on
existing loans (including
shareholder or director
loans), borrowings or other
facilities (whether or not
currently drawn down) to
date made to the Company
for the benefit of a business
by third parties.
• Details and copies of all
relevant documents for any
guarantee, indemnity,
suretyship or comfort given
by the Company for the
benefit of any other
company.
• Details of any outstanding
liabilities (including
contingent liabilities) which
have arisen outside the
ordinary course of business
of the Company.

24. ©
E: Others
• Details of any material adverse change in the
financial position, prospects or turnover of the
Company or of any known event or matter which
has occurred or is likely to occur which will or is
likely to give rise to any such change
• General fundraising/ business overview
presentation