Due Diligence for a startup - what's involved?
Hi HN! We've received an offer to buy us out :)
Just wanted to know what's usually involved in due diligence for a 1 year old web start up. How do we prepare for it etc.
Cheers
Just wanted to know what's usually involved in due diligence for a 1 year old web start up. How do we prepare for it etc.
Cheers
Well, you guys are not the ones that are responsible for doing the due diligence if you are getting bought out.
But, if you want to know some of details needed then I would have all of this information ready;
Financials - past, present, future projections Detailed company information - revenue drivers, strategy, marketing strategy, how are you getting customers (paid / not paid ), how much revenue per customer, lifetime revenue, lifetime of a customer Revenue driver margins, future revenue drivers? Competitor analysis - what keeps you ahead/behind Growth areas for your industry/business All industry info - qualitative and quantitative Porters 5 forces would help with getting to know a startup Management team background Advisor background Current stock ownership, options, ect Laws surrounding your product - what is the legal landscape, any pitfalls or shifts that will negatively/pos impact your biz? Economics of the biz - costs, expenses, variable costs, ect Operating plans Critical risks list of assumptions
Thats a bunch off of the top of my head - some of those categories hold a bunch of topics like 'fin statements' make sure you have balance sheet, cash flow, income statement, valuation model, ect.
Hope that helps, there is more..
1) Who is the offer from? What are their credentials? Are they a (well)known /trustworthy entity, with some sort of track record?
2) If not, it could be a 'ploy' from a competitor at worst, or a frivolous offer.
3) In any case, consult a (competent) lawyer with relevant experience before disclosing any proprietary information (that could not be otherwise available) to them.
-HTH