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What Every Startup Founder Should Know About Due Diligence
Finding an investor is difficult. It is more difficult to persuade him to invest in your startup. But the most difficult part is actually closing the deal. Why?
Because an investor will want to know everything he can know about your company before he hands over his money.
Due diligence for a startup signifies that the angel investor will have accountants and legal experts evaluate and understand the company's records. They make sure that the financial records, intellectual property, and staff are sufficient to justify the investment amount. People have a tendency to exaggerate the truth, and due diligence for a startup is how the angel investor verifies everything claimed during the pitch!
Keep in mind that investors will not depend solely on the information provided by your team. They will conduct external and independent tests, which may include interrogating former and current employees and partners. They can contact customers to obtain input on your product and experiences with your company.
During due diligence, it is critical to be truthful with the investors. If the startup has any issues, it is better to reveal them during due diligence than to try to conceal them.
Due diligence should not be a stressful or difficult process if you truly represented your company during the investment pitch. Sure, you'll be required to produce a massive amount of documentation and may need to meet with investors hundreds of times.
But if everything works out, you could be going to look at a brilliant and exciting new phase in your startup's growth path!
