If you are pitching investors, engaging venture capitalists, looking over term sheets or issuing SAFEs, due diligence and fundraising procedures are an essential part of the process of starting a business. It is important that you present a clean and organized picture of your business. To be able to navigate the due diligence and fundraising process with ease, it is important to have your financials in order. It is also important to make sure you have a current cap table and that you respond quickly to any new investor requests.

Investors are convinced of the potential of your product and the market opportunity that it offers when they decide to invest in your business. However they are also considering the possibility that your venture could fail to meet its potential. Therefore, they’ll want to verify the information you provide to them during due diligence by examining the evidence and conducting a financial analysis. This is the only way to ensure that they’re making an investment decision that is sound.

Investors may request documents such as contracts that prove commitments to customers, test reports which support your claims about performance, and market research. Therefore, it is essential that startups are prepared to share and create all of the information required during due diligence. A data room like DocSend is a powerful tool to aid in organising, controlling access to, and secure every sensitive document an investor might need during due diligence. Smart permissions management permits you to restrict access only to those who require access to the relevant information.

Investors should also examine your intellectual property portfolio well, which is a different aspect of your due diligence checklist. Therefore, you should be prepared to prove that you own all of your IP assets, and to due diligence and fundraising processes disclose any agreements that could impact your income.

The amount of documentation that startups need to prepare for due diligence will depend on the stage it is. For instance, pre-seed and seed investors may only need basic documents, like an pro forma cap table and incorporation documents. Investors will be more thorough once you get to the stage of a costed round of fundraising. They will require a full set of financial and legal documents.

The due diligence process could be lengthy but with a meticulous approach and a clear picture of your business it shouldn’t be a burden or difficult to navigate. Even if you’ve never raised any funds It is crucial to remember that fundraising is a continuous and fluid process. Therefore, it is advisable to begin courting investors and building relationships with them, and sharing information over time. It is important to keep the momentum going and to be responsive to investor questions to ensure that you close your Series A round of funding successfully.

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