Due diligence

Hello startup world!

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With winter (and the festive season) on our doorsteps, it’s the perfect time to give your startup a quick checkup. Take a closer look at your finances and legal documents to make sure everything’s in order before the year’s final stretch. Coincidentally, that’s what due diligence is all about too. Let’s dig a little deeper, shall we?

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What’s due diligence?

Due diligence is a deep dive investors take into your business to see exactly what they’re investing in. Think of it as a “wellness check” for your startup. Through this process, investors review everything: your financials, legal standing, team structure, and potential risks. They want to see the full picture, from how well you’re managing funds to how cohesive your team is. Due diligence is your chance to show that your startup is built for the road ahead.

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Why does this matter?

Due diligence isn’t just another box to tick. It’s key to securing investment and preparing your startup for growth. Here’s why it matters:
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Secures a better deal: Passing through the due diligence process with flying colors puts you in a better position to negotiate favorable terms and strong valuation for your startup. If you have all documents ready and have a plan for addressing all potential issues, you can move faster toward funding. Plus, transparency helps build trust with investors.
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Lets you spot problems early: Due diligence often reveals areas for improvement, like missing legal documents or weak financial tracking. Fixing these now saves you bigger headaches later.
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Showcases your strengths: This is your chance to highlight what makes your startup unique. Share key achievements, team strengths or big partnerships to show your startup’s potential.

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Dos and don’ts

To make the due diligence process as smooth as possible, here are the essentials to focus on:

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Dos

• prepare early, get your documents in order to minimize risks that could threaten the deal
• plan ESOP pool size based on current team size and future hires
• be proactive about any issues you can’t fix right now and have a plan to address them post-transaction

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Don'ts

• underestimate the depth of the investor’s due diligence, especially on the areas they care about
• rush through document prep, double-check for accuracy and clarity
• skip realistic projections showing how investment fuels growth

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In a nutshell

Due diligence may sound intimidating, but it’s an opportunity to show that your startup is ready to grow. With organized documents, transparency, and a prepared team, you can turn due diligence into an opportunity to stand out. Use this phase to prove that your startup is both promising and well-prepared for success.

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Want to know more about due diligence or any other investment related topic? We’re here to help! Reach out to our team or follow us on LinkedIn for more insights.

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See you next month!

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