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GETTING
SMARTER
WITH DUE
DILIGENCE.
For Early Stage Founders
SEGUN COLE’S LEARNINGS
Let’s start with the basics
of due diligence.
In the world of startups, the term “due
diligence” refers to an audit of a
company that’s performed in order to
discover possible business liabilities
or deficiencies in light of a planned
business transaction, such as a
merger or an investment.
Due diligence offers a
systematic way for venture
capital firms to analyze and vet
startups in order to mitigate
uncertainties and risks before
they decide to invest in them.
Due diligence for startups may seem like an intimidating prospect.
Most investors are
extremely experienced and
well-versed in the process
of building and growing a
startup and will not only be
able to point out what your
startup deficiencies are but
how you can address them.
Finding an investor is hard.
Due diligence will offer an impartial
and detailed assessment of where
the company is at and will give the
startup a good breakdown of its
strengths and weaknesses.
Things you need to do to
be ready for Due
Diligence.
1.Understand your market
2.Review your Documents
3.Be Realistic
4. Open to Negotiate Valuations
5.Dedicate Time
What VC’s want to see
What VCs want to see
What VCs want to see
Things to Never
Assume.....
At the end of the day the most
unlikely group may come through for
you and the most likely investor will
disappoint.
Never assume you
know who will get
over the finish line
and make a
commitment they
will fulfill.
You have to keep pursuing new prospects up until the day you close as
inevitably someone will get a hiccup and back away. Leave no stone
unturned.
Never assume you
are done and that
you have identified
your group of
investors.
Keep providing them with up-to-date data and items of progress to
keep them involved as you never know what will persuade them or
perhaps why they said no in the first place.
Never give up on
an institution who
says no.
A – Do you actually have money to commit? If not, when?
B – What is the due diligence process and how long will it take?
C – How is the decision finally made?
D – If you were to commit, what would be the range of commitment?
E – Understand who the point person is in their group for follow up and
decide who is most appropriate in your group to follow up. Make someone
responsible.
Always, but always,
ask the following
questions before
you leave the first
meeting:
even to the point of using a CRM system of some kind to record who was at the meeting and any identifying features (e.g. beard,
color of hair, tall or short, or anything they told you about themselves) which might later assist you when going back to them for
a later meeting.
Listen to what is
said and keep
extensive and
accurate notes
from every
meeting
Most times, because they will have had 50 meetings like yours in the
interim, they will probably have forgotten what you look like and
what they said they would do next.
Have a very organized follow
up process, and don’t wait for
anyone who says they will
call you back in 2 weeks or a
month to call you back.
Anything you can do to make it easier for potential
investors will accelerate the process or maybe even
get them started on due diligence sooner.
Prepare in advance the list of all your
company CEO’s, co-investors and
personal references with e-mail and
telephone numbers and collect all of
the data on each company in your
portfolio.
Most times it isn’t true, as it may have
been just for a first closing.
Don’t believe or be
discouraged by
stories you hear
about other groups
raising money who
have done it faster.
Focus early on to get a
lead name investor
that others will
respect and
follow.

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Due Diligence Masterclass.pdf

  • 1.
  • 2. GETTING SMARTER WITH DUE DILIGENCE. For Early Stage Founders SEGUN COLE’S LEARNINGS
  • 3. Let’s start with the basics of due diligence.
  • 4. In the world of startups, the term “due diligence” refers to an audit of a company that’s performed in order to discover possible business liabilities or deficiencies in light of a planned business transaction, such as a merger or an investment.
  • 5. Due diligence offers a systematic way for venture capital firms to analyze and vet startups in order to mitigate uncertainties and risks before they decide to invest in them.
  • 6. Due diligence for startups may seem like an intimidating prospect. Most investors are extremely experienced and well-versed in the process of building and growing a startup and will not only be able to point out what your startup deficiencies are but how you can address them.
  • 7. Finding an investor is hard. Due diligence will offer an impartial and detailed assessment of where the company is at and will give the startup a good breakdown of its strengths and weaknesses.
  • 8. Things you need to do to be ready for Due Diligence. 1.Understand your market 2.Review your Documents 3.Be Realistic 4. Open to Negotiate Valuations 5.Dedicate Time
  • 10. What VCs want to see
  • 11. What VCs want to see
  • 13. At the end of the day the most unlikely group may come through for you and the most likely investor will disappoint. Never assume you know who will get over the finish line and make a commitment they will fulfill.
  • 14. You have to keep pursuing new prospects up until the day you close as inevitably someone will get a hiccup and back away. Leave no stone unturned. Never assume you are done and that you have identified your group of investors.
  • 15. Keep providing them with up-to-date data and items of progress to keep them involved as you never know what will persuade them or perhaps why they said no in the first place. Never give up on an institution who says no.
  • 16. A – Do you actually have money to commit? If not, when? B – What is the due diligence process and how long will it take? C – How is the decision finally made? D – If you were to commit, what would be the range of commitment? E – Understand who the point person is in their group for follow up and decide who is most appropriate in your group to follow up. Make someone responsible. Always, but always, ask the following questions before you leave the first meeting:
  • 17. even to the point of using a CRM system of some kind to record who was at the meeting and any identifying features (e.g. beard, color of hair, tall or short, or anything they told you about themselves) which might later assist you when going back to them for a later meeting. Listen to what is said and keep extensive and accurate notes from every meeting
  • 18. Most times, because they will have had 50 meetings like yours in the interim, they will probably have forgotten what you look like and what they said they would do next. Have a very organized follow up process, and don’t wait for anyone who says they will call you back in 2 weeks or a month to call you back.
  • 19. Anything you can do to make it easier for potential investors will accelerate the process or maybe even get them started on due diligence sooner. Prepare in advance the list of all your company CEO’s, co-investors and personal references with e-mail and telephone numbers and collect all of the data on each company in your portfolio.
  • 20. Most times it isn’t true, as it may have been just for a first closing. Don’t believe or be discouraged by stories you hear about other groups raising money who have done it faster.
  • 21. Focus early on to get a lead name investor that others will respect and follow.