Startup due diligence is one of the most important components of the funding process for a new business…
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As Angels and VCs are tightening their fists, entrepreneurs are less likely to get next stage funding. Having a great team, pitch and front man are simply not enough.
Experienced entrepreneurs know that they are preparing for the investors due diligence from the very beginning. They establish a process that supports the development and growth of their investable company. In order to begin that process, you must know what the investors will request and why they are requesting it.
David S. Rose, the CEO of Gust and Founder of the New York Angels defines Due Diligence in his book, Angel Investing – The Gust GUIDE TO Making Money and Having Fun Investing in Startups. The careful investigation into a company prior to making an investment.
Concept stage startups are usually funded by entrepreneurs, family, friends and individual angels. An opportunity has presented itself to you, an idea for a scalable business you see clearly in your mind. How much is your idea worth? It all depends on what you do with it.
One or two of every ten investments bring most of the returns to the portfolio of an angel investor, and it’s difficult to determine which of the companies will provide the returns.
A principal goal in the life of a scalable startup company is getting external equity funding. The closing of a funding round is cause for celebration. However, founders are often left with a somewhat bitter-sweet taste when they realize what just happened.
Investable companies don’t occur by accident. In fact, the opposite may be true; many companies may accidentally become un-investable.
There are a number of reasons startups ultimately fail to obtain funding. The following due diligence showstoppers are often overlooked by the entrepreneur.
Adequately addressing these 8 factors in your pitch to an angel group will build confidence in the minds of the investors, improving the ultimate probability of funding.