Know the risk-return-ratio of your startup investment
Startups promise you high returns. In contrast to traditional investments, however, you also accept higher risks. It is therefore in your best interest to be well informed about the potential returns and associated risks before making a final investment decision. Our team has gained extensive experience in working with investors and startups to correctly identify both potential and risks so that you can make even better investment decisions.
Make better informed investment decisions
Make objective decisions
Falling in love with a startup can impair objectivity. A second opinion brings your objectivity back to a normal level.
Be in control of your investment
Nobody is perfect, but if you know where your startup excels and where it struggles, you can take immediate action together with the founders to increase the return potential of your investment.
Know if startup is fairly priced
Investing in a great startup only makes sense if the valuation is fair and the risk of a future down round is small.
Know about the business understanding of the founders
Validating the assumptions and claims in the business plan and financial forecast reveals whether the founders know their market and business well.
Investment decisions resulting in higher returns
Make better informed investment decisions resulting in higher returns.
Get in touchProcess overview
The due diligence process validates the information and assumptions provided by the startup and at the same time determines whether any relevant information is missing that could have a significant impact on the return potential or risk profile of the startup. Our due diligence process reveals the startups strengths, weaknesses, threats and opportunities in the following six business dimensions:
01
Market due diligence
- Market size and growth
- Market trends
- Regulations
- Competitive intensity / market attractivity
02
Product and service due diligence
- Product development and roadmap
- Product-market-fit
- Scalability in production and delivery
- Unique selling proposition (USP)
03
Business model due diligence
- Traction
- Pricing
- Unit economics
- Go-to-market strategy
04
Team due diligence
- Match of experience and skill set of founders and workforce
- Network and experience of advisory board members
05
Legal due diligence
- Incorporation documents
- Shareholders’ agreement
- Cap table
- Subsidiaries
- IP & trademark
- Material contracts
- Litigations
06
Financial due diligence
- Financial performance
- Financial status and health
- Financial projections and assumptions
- Valuation
Pricing
Startup due diligence
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Frequently asked questions
First, the scope of due diligence must be determined by the reviewing party. The due diligence will include technical, commercial, financial and legal aspects. Second, the right experts must be appointed to request and evaluate the documents required to perform the due diligence. These experts then prepare a due diligence report that lists the risks associated with a potential investment. The goal of due diligence is to confirm the information that the founders have shared with investors and reduce the risk of an investment.
The Startup Due Diligence Checklist is a comprehensive list of required documents for conducting due diligence. The documents provided by the startup then automatically show how mature and professionally managed the startup is in terms of business, technology, finance and legal.
There are five different types of due diligence that can be performed: commercial, technological, financial, legal and team due diligence. Therefore, a comprehensive due diligence requires at least three experts, namely a financial expert, a technology expert and a legal expert, to evaluate the startup’s documentation.
Investors check whether the information they have been told by the company’s management is true. They also look for risks that might arise from the product, technology, business, financial, and legal aspects. If one or more red flags are found, investors usually do not invest and wait until the risk is mitigated.
Red flags can arise from technical, financial and legal aspects of the company, especially if these weaknesses and risks have not been disclosed to the investor beforehand. Typical warning signals are poor software architecture in combination with unclean code, incorrect financial data and missing employment contracts.
The due diligence process for private equity companies involves significantly more documents to review. Therefore, teams of experts from the areas of technology, finance and law work together on the due diligence report. Therefore, the workload and costs for a private equity due diligence are significantly higher than for a startup due diligence.
Venture capital due diligence lists vary from investor to investor. Your lead investor will provide you with a list after they have made the decision to invest in your startup.
The due diligence checklist for the seed round requires the most basic documentation such as pitch deck, founding documents, employment contracts, current P&L and balance sheet, and technical documentation on the product, if applicable.
With each upcoming series financing, the due diligence list becomes more extensive, but you simply update older data rooms and add additional documentation whenever needed, reducing the amount of work required to complete your data room.