The due diligence process as part of the fundraising process involves potential investors screening the company for opportunities and risks. To make the process as efficient as possible, it is important for founding teams to know all relevant documents and audit contents and to prepare them professionally. We have compiled the most important due diligence types as well as the relevant documents below:
The content of this article is based on our personal experience. It does neither constitute nor replace legal advice. If you have any questions on financing rounds or company valuation, we are happy to advise. Get in touch using our contact form or arrange your first free consultation..
Due diligence describes the detailed screening process of potential investors in a company and represents an important step in convincing and acquiring investors. Among other things, the company is examined with regard to its commercial orientation, legal and financial situation and personnel structure. Depending on the business model, other aspects such as technology, marketing and environmental aspects may also be relevant. Professional preparation can accelerate the audit process and increase the likelihood of investment. This includes, above all, the preparation of the relevant documents and the subsequent data room management. What types of due diligence exist and which documents are relevant in each case is shown below:
Commercial Due Diligence
Commercial due diligence examines the commercial positioning. The strategy, business model, product and market are examined in more detail.
Relevant documents:
Pitch Deck: The business model and the growth strategy of the company are shown here. You can find a free template in our Downloads.
Market and competitor analysis These include in-depth analyses of market size, development, drivers and competitors.
Company brochure The products or services are presented for potential customers.
Legal Due Dilligence
The legal due diligence examines the legal situation of the company. An analysis of significant contractual relationships and legal risks of the company is carried out.
Relevant documents:
Company/partnership agreements & list of shareholders: These documents provide an overview of shareholders, their shares and significant rights and obligations.
Customer, service and employment contracts: These contracts represent a collection of relevant contractual relationships and commitments.
Licenses and patents: These documents provide information about the legal protection of the company's activities.
Financial Due Diligence
As part of financial due diligence, investors review the financial situation of the company. They examine the actual financial situation as well as the company's planning.
Relevant documents:
Net Assets, Financial Position, and Results of Operations: These documents provide an overview of the company's earnings, assets and liabilities.
Loan agreements: The contracts provide information on financing through borrowed capital and collateralization.
Business planning: The planned financial development of the company is presented here.
Personnel Due Diligence
The personnel structure of the company is examined as part of personnel due diligence. The personnel and organizational structures are examined.
Relevant documents:
Organizational Structure: It provides an overview of the organization's structure and responsibilities.
Management CVs: The collection of all management team resumes and references provides insight into personnel skills.
Employee agreements: These provide an overview of bonus agreements and employee shareholdings.
Other types of due diligence
Depending on the business model, further points of examination are relevant as part of the due diligence. The relevant areas of the company are analyzed as part of a due diligence process individually selected for the company. Examples are:
Technical Due Diligence: The technological processes and resilience of self-developed technical products are tested.
Marketing Due Diligence: A review of relevant documentation on marketing plans, channels and costs is conducted.
Processual Due Diligence: All procedures and processes within the company are examined.
In addition to the above mentioned list, we provide a free checklist in our download area , which contains all relevant documents for the respective types of due diligence processes in the context of fundraising.
The checklist contains all relevant documents and topics of a commercial, legal, financial, personnel and other (e.g. tech, marketing, processual) due diligence.
At Trustventure, we advise young companies on financial issues and offer CFO-As-A-Service. Our expertise in questions of corporate finance, planning and controlling creates transparency and security for you and your investors. Get in touch using our contact form or send us an email via office@trustventure.de.
