Due diligence is going to be fundamental since a lack of knowledge of this process can throw back many investors.
When your startup starts looking for investors, one of the most important things is to be prepared to submit to an intensive process of due diligence.
In Bloomium is also required a certain documentation that is usually asked to the startup in different phases. Through the experience has been detected the importance of this process, and especially of some specific aspects that will be explained throughout the article.
In this section, you will want to check that you have your licenses in order, that you have no pending legal processes or what have been your past litigation and future litigation risks.
In addition to checking that all your corporate data are true and in order (books of minutes, writings, partner books, data protection security documents …) and what contracts you have signed with clients, suppliers, leasings, assets in property, etc
One of the most sensitive issues is the shareholder’s agreement, it contains the shareholder’s rights and obligations. Very often entrepreneurs don’t take enough time to build a solid one from the beginning and it may cause problems in the future.
Its intensity and depth will depend on the interest that your technology has to the buyer. But at least you want to ensure that you own all the rights to your developments, that your development team is competent and that you have the code sufficiently documented and traceable.
When investing through the tech for equity model, as Bloomium does, this chapter is even more relevant. Very often our developers need to build over what is already done. So being sure that what you have is solid will be key in assuring the viability of the investment.
They will also want to check your security systems and the robustness of your technology infrastructure and contingency plans for disasters of all kinds.
The investor will be very interested in buying your client portfolio and assuring you that there will be no problems with your continuity in the event of the acquisition. The duration of the contracts you have signed and their termination clauses will be important, as well as the nature of your relationship with your main 10 clients and their evolution in the last 3 years. They will look for an answer to most of these questions: Are there enough customers? Is there a clear value proposition for customers? Is a market need to be met? Is the market big enough? Is the market growing? Is the demand stable or is it a fad?
And last But not least…
Investor Pitch Documents
One of the most important points is to qualify the entrepreneur and start-up from the outset. To do that, it’s very important and it’s always asked: an elevator pitch, the executive summary, and the business model.
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