PrintThere are two main types of venture capital due diligence: business due diligence and legal due diligence.
Business Due Diligence
Before venture capitalists make an investment in your company, they will conduct business due diligence. This generally includes:
- A review of the market for the product of the company
- A background check on the founders and key management team
- The competition for the company
- Discussions with key customers of the company
- An analysis of financial projections for the business
- A review of any holes in the management team
Legal Due Diligence
Venture capitalists will also have their lawyers conduct a legal due diligence. You should expect to receive a due diligence checklist from the venture capitalists' attorneys, requesting information on the company.
Responding can be time consuming, and you need to make sure all your legal documents are in order. If they're not, this will delay or even potentially kill the deal. Make sure your lawyer is experienced and knows what to expect.
Here are some of the documents you should be prepared to quickly hand over:
- Key contracts for the business
- Employment agreements
- Minutes and consents of the board of directors and shareholders
- Confidentiality and invention assignment agreements with employees
- Corporate charter and bylaws
- Litigation-related documents
- Patents and copyrights, and other intellectual property-related documents
Reviewing and readying the documents on this list will help expedite closing a deal.
