As a startup founder, preparing for due diligence is crucial for securing funding and driving your business forward. From pre-seed to Series A, having your documentation in order, understanding what investors look for, and leveraging technology can significantly streamline the process. In this article, we will cover the essentials of preparing for due diligence in 2024, highlight the role of AI, and demonstrate how Capboard can simplify this journey.
What Needs to Be Prepared
1. Company Formation and Legal Documents
Ensure all incorporation documents are readily available. This includes your certificate of incorporation, bylaws, operating agreements, and any amendments.
2. Financial Statements
Prepare your financial statements, including balance sheets, income statements, and cash flow statements. Make sure these are up-to-date and accurately reflect your company's financial health.
3. Cap Table and Equity Structure
Your cap table should clearly show the ownership structure of your company from incorporation to the latest round of funding. This includes all equity grants, convertible notes, SAFEs, and stock options.
4. Intellectual Property
Gather all documents related to your intellectual property, including patents, trademarks, copyrights, and any agreements related to IP ownership.
5. Employee Agreements
Ensure all employment contracts, consulting agreements, and equity incentive plans are documented and organized.
6. Customer and Supplier Contracts
Compile all significant contracts with customers, suppliers, and partners. This helps investors understand your revenue streams and operational dependencies.
7. Compliance and Regulatory Documents
Have all necessary licenses, permits, and compliance documents in place. This includes GDPR compliance, data protection policies, and any industry-specific regulations.
What Matters Most
1. Transparency and Accuracy
Investors appreciate transparency. Ensure all your documents are accurate and reflect the true state of your business. Any discrepancies can raise red flags and potentially derail the investment process.
2. Team and Culture (in early-stage this is number 1)
Highlight your team's strengths and the company culture. Investors invest in people as much as they do in ideas. A strong, cohesive team with a clear vision is a significant asset
3. Growth Metrics
Showcase your key performance indicators (KPIs) and growth metrics. This includes user acquisition rates, customer lifetime value (CLTV), customer acquisition cost (CAC), Monthly Recurrent Revenue (MRR) and other relevant metrics that demonstrate your business's potential.