Preparing the Diligence Documents

Investors interested in your startup will want to perform due diligence on the deal.

Diligence is a standard process investors go through to review all the relevant documents and checkmark all the boxes before investing.

In preparing your diligence documents consider the following:

Start with a checklist of potential items to include.

Most due diligence lists are comprehensive and include many items not applicable to an early-stage company.

Start with the standard documents which include the following:

Entity filings — investors want to see documentation on your LLC or C-Corp filing.  

Many investors only invest in Delaware C-corps.  You may need to change your entity filing to meet the investor’s requirements.

Patent filings — half the value of submitted patent filings are for investors as it demonstrates a competitive advantage.

Consider filing provisional patents in advance of a fundraise.  These are relatively simple documents compared to full patent submissions.

Three to five-year financial forecasts — you’ll need detailed financial projections showcasing your vision of how you will spend the raised funds and the business results from it.

This needs to be bottom-up analysis and not a top-down estimation.

Cap table — this is the list of the current equity owners and what percentage each one has.

Organization chart — this shows the current employees and their positions.

Gather these core documents into one folder that you can give to interested investors.

If you consider the information confidential, then you can ask the investor to sign a Non-Disclosure Agreement.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

---

Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org  

Check out our other podcasts here: https://investorconnect.org/ 
For Investors check out: https://tencapital.group/investor-landing/ 
For Startups check out: https://tencapital.group/company-landing/ 
For eGuides check out: https://tencapital.group/education/ 
For upcoming Events, check out https://tencapital.group/events/  

For Feedback please contact info@tencapital.group   

Please follow, share, and leave a review.

Music courtesy of Bensound.

Copyright (c) 2024, Hall Martin and investorconnect.org. All rights reserved.

Disclaimer:
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.