Tue, 22 March 2022
Key Factors in Diligence
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
There are several factors to achieve success in running a due diligence process.
First, dedicate at least 20 hours to due diligence.
Many investors dedicate less than 20 minutes.
Share your diligence findings with other investor groups in return for their findings.
Apply your skills and network to the process where possible.
Due diligence can be an endless game, so you need to prioritize your efforts.
Focus on the key risks in the deal.
Spend the majority of your time on the management team.
This is the critical success factor in most startups.
Check the deal structure to make sure you understand it and how it works for you.
Make sure you talk with the users of the product.
Write out your findings and assumptions to refer back to later.
Consider having the startup sign a Reps and Warranties contract for the diligence they provided.
This can give you recourse in the event key information was left out.
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