Key Factors in Diligence

Key Factors in Diligence

March 22, 2022 by investor

Key Factors in Diligence

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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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.