DUE DILIGENCE OF A STARTUP

Accelerate your company with these expert tips on "Startup Due Diligence". Analyse and discover this TIP!

This is a review of the legal, tax and accounting aspects of the business, usually carried out by an external team of experts appointed by the investor, in order to check whether the company has everything in order.

When should I perform due diligence?

If you have already decided to invest in a startup because it seems investable and you have taken all the steps that we have recommended at the Business Angel School, only in this case should you begin to perform due diligence. This is a high cost for the investor to undertake, provided that he or she is already sure that he or she wants to invest. Due diligence is a a comprehensive research and evaluation process that is carried out prior to an investment in a company or project. In the case of a startup, the due diligence focuses on assessing the viability and growth potential of the company, as well as identifying possible risks and weaknesses.

It is part of the legal process of a investment round (+). The due diligence process for a startup includes a detailed analysis of the company, including its business strategy, business model (+), management team, market and competitors, as well as its financial situation, including its financial history, financial projections and capital structure. In addition, legal, technical, and regulatory aspects are also assessed. intellectual property (+), including patents, trademarks and licensing agreements. In short, due diligence is a important process to help investors make an informed decision on whether to invest in a startup or not, and allows investors to have a full understanding of the risks and opportunities associated with the investment.

Practical tips for a business angel to perform due diligence before investing in a startup

Before investing in a start-up, it is important for business angels to carry out due diligence to assess its potential and minimise risk.

HERE ARE SOME PRACTICAL TIPS FOR CONDUCTING GOOD DUE DILIGENCE:

1. Meet the founding team (+): A strong and experienced team is a key factor for the success of a start-up. Research the founders and assess their experience and skills.
2. Analyse the market and competition (+): Make sure you understand the startup's target market and its position vis-à-vis the competition. Assess whether there is a real opportunity for the company.
3. Review the business model (+): Make sure the company's business model is sustainable and scalable. Analyse the monetisation strategy and assess whether it has growth potential.
4. Check the numbers (+): review the company's finances and make sure they are sound. Evaluate its financial history and future projections.
5. Expert consultation: consider consulting with experts in the field to obtain an objective assessment and a deeper understanding of the challenges and opportunities for the company.
6. Do thorough research: research as much as you can about the company, including its products or services, its growth history, its strengths and weaknesses, and its risks and opportunities.

Due diligence is a key process for business angels wishing to invest in a start-up. By carefully assessing the potential of the company, investors can make an informed decision and reduce the risk of their investment.