Are you wondering what goes into due diligence and also what are all the items that investors or perhaps potential acquirers would want to see as part of your due diligence package?
Most entrepreneurs focus so heavily on finding investors that sidesteps how to create a due diligence package. If you are pitching your business to investors, you should already have a due diligence package in place.
Whether you are preparing for a future funding round or you’re already immersed in the pitching process, let me take you through how to create a due diligence package during fundraising.
What is a Due Diligence Package?
Whenever an investor decides to buy equity in a company, they carry out some form of due diligence. This simply means that they look at the past, current, and future standing of the company.
Sometimes, on the surface, a company appears to have a great product, only for its profitability to fall away under scrutiny. Investors carry out due diligence to limit unexpected negative surprises so that they can make an informed decision about whether to invest or not.
A due diligence package includes the materials and information that potential investors will appraise during the pitching process. But what is included in it? In essence, there is a “due diligence checklist” which guides the start-up entrepreneur in shaping this package.
Investment can dry up as quickly it appears. Investors are often looking at multiple investment opportunities at one time. For this reason, you do not want investors to be waiting while you scramble together a due diligence package for them to evaluate.
Having your due diligence package ready to go, is a must for showing that you are a serious entrepreneur and can be trusted. You don’t want to be the bottle neck and you should put this in place before you are even out there pitching.
Typically the due diligence package will come after an investor is excited after reviewing your pitch deck.
Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
What Should I Include in a Due Diligence Package?
As described in chapter 5 of my book “The Art of Startup Fundraising”, by creating your own due diligence package, you can influence what information investors encounter about your business and brand.
It’s better that they get the bulk of the due diligence information from you and your company rather than through Google or an untrustworthy source.
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