Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
There are several approaches to Due Diligence. The most common is the “Thorough Approach” in which you review each aspect of the business and focus on the top items.
Main areas to cover in due diligence are:
What’s the market size — Total, Serviceable, Beachhead?
How fast is it growing?
What is the state of the product both technical and market?
Does it solve a burning need or add general value?
What actually has been developed?
What remains to be developed to go to market?
Who has used the product and what do they say about it?
What contracts are in place?
Are there any lawsuits?
What patents have been filed/approved and when?
What trade secrets do they have?
What revenues have come in?
What are pending?
What is the burn rate?
What is the capitalization structure?
Who are the major players?
Key players and their roles and responsibilities?
What contracts are in place with each?
Of course there’s a checklist for each area to complete as well, but this gives an overview.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.