What is Venture Due Diligence?

Introduction to Diligence…as-a-Service.

But, what exactly is Due Diligence?

  • Hard due diligence is driven by legalities and numeric data.
  • It is concerned with cost & benefits, structures, assets, and liabilities; focused more on quantitative values.
  • It is oriented towards a “traditional approach and focuses on number crunching and assigning values to different sectors.
  • It considers the financial position of an organization and the earnings before interest, taxes, depreciation, aging of receivables, payables, cash flow, and capital expenditures.
  • Financial/Accounting, Tax, and Operational Due Diligence are all examples of hard due diligence.
  • The soft due diligence process is concerned with people: employees, customers, partners.
  • It is concerned with motivating employees and compensation packages created specifically to boost their motivation.
  • It has come into increasing focus as an integral component of successful personnel catering to a successful investment.
  • Considers the culture of an organization and the roles, capabilities, and attitudes of its people.
  • Culture and Human Resources Due Diligence are the main examples of a soft due diligence.

Benefits of a Due Diligence Process

TABS Helps Organize & Display Your Due Diligence

  • Articles of incorporation.
  • Corporate bylaws and any amendments.
  • Record of Meeting Minutes (containing ownership and board meeting minutes).
  • List of subsidiaries and any other entities (i.e. partnerships and joint venture agreements).
  • Jurisdictions lists where the company is authorized to conduct business.
  • Business plan (executive summary, market analysis and plan, operational plan, and complete financials).
  • List of officers and directors.
  • Records surrounding issuances or grants of stock, options, and warrants.
  • Documentation of past and current shareholder agreements, rights, and other matters concerning ownership.
  • Copies of any voting agreements, trusts or proxies.
  • Copies of right of first offer or refusal and pre-emptive rights.
  • Transfer restriction agreements and registration agreements.
  • List of products and services offered and in development.
  • Market research including size, share, trends, drivers, demand, conditions, opportunities, threats, differentiators, and outlook.
  • Profiles of major competitors.
  • Customer analysis including customer segments, demographics, churn rate, satisfaction, customer acquisition cost, NPS score and lifetime value.
  • List of major suppliers.
  • Identification of any barriers to entry in the marketplace.
  • Copies of long-term sales contracts.
  • Agreements with distributors, value-added resellers, and dealers.
  • List of software used by the company and copies of any applicable licensing agreements.
  • Any IT outsourcing agreements.
  • A list of interfaces that link systems together.
  • Information around security and controls framework.
  • Details surrounding any hack, breach, or any other cybersecurity incident.
  • Any pending or threatened litigation against or initiated by the company.
  • Any settled or active litigation files against or initiated by the company.
  • Any consent decrees, injunctions, judgments, settlements, or other orders.
  • Copies of all contracts.
  • Any loan agreements, bank financing agreements, and lines of credit to which company is a party.
  • Licensing or franchise agreements.
  • Copy of all guarantees to which the company is a party.
  • Information as to any past or present governmental investigation.
  • Copies of all attorneys’ responses to audit inquiries and all attorneys’ letters to auditors.
  • Documentation around any tax liens or settlements.
  • Federal, state, local and foreign income tax returns for the last three years.
  • Documentation surrounding the capitalization of the company.
  • Three years of annual and quarterly audited financial statements, with the auditor’s reports.
  • Unaudited financial statements for comparison.
  • Future financial projections.
  • Budget plan.
  • Any auditor communication to management for the past five years.
  • Schedule of accounts receivable and accounts payable.
  • A description of depreciation and amortization methods and changes in accounting methods over the past five years.
  • Copy of the company’s general ledger.
  • Company’s operating model overview (both insourced and outsourced).
  • Detailed description of the Change Management Process when a change to the operating model is needed.
  • Overview of the organizational/functional structure of the teams.
  • List of company’s primary and support activities.
  • Details around distribution model and channels.
  • List of all owned or leased properties and applicable details (i.e. rent amount, location, dates, etc.).
  • Details on all sales and purchases of major capital equipment in the last three years.
  • Copies of all lease agreements for equipment.
  • Copies of real estate deeds, appraisals, mortgages, leases, surveys, title policies, use permits and any other relevant documentation.
  • Schedule of owned and leased fixed assets, including description, date acquired, value and location.
  • Employee demographic information (age, location, title, tenure, skillset, compensation, etc.).
  • Employee handbook (should cover policies, benefits, procedures, and training).
  • All employee, non-disclosure, non-solicitation and non-compete agreements.
  • Copies of all stock options and stock purchase plans.
  • Resumes of key employees.
  • Assessment of the competencies, skill sets, and capabilities of employees
  • Recruiting and onboarding process.
  • Copies of payroll documents.
  • Copies of any labor or employment contracts.
  • Interviews with past and present owners, operators, and occupants.
  • Copies of any violations, complaints, or requests for information regarding environmental, workplace safety and health (from private parties or governmental authorities).
  • Historical sources of information (i.e. aerial photographs, fire insurance maps, chain of title documents, and land use records).
  • Federal and local government records.
  • Permits and records relating to environmental matters such as underground storage tanks, air quality, water use, solid/liquid wastes and hazardous waste storage or disposal.
  • Any records of environmental clean-up liens.
  • Listing of hazardous substances (i.e. asbestos, pesticides or petroleum products) and any intentional or accidental spills/releases of the material.
  • Details on workplace safety and health programs.

DaaS (Diligence-as-a-Service) platform providing a holistic & in-depth qualitative evaluation of an early-stage venture. Powered by FSLTD. www.tabsscore.com

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TABS Group™

TABS Group™

DaaS (Diligence-as-a-Service) platform providing a holistic & in-depth qualitative evaluation of an early-stage venture. Powered by FSLTD. www.tabsscore.com

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