Basic Due Diligence

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Investors pursuing an investment in a startup should perform due diligence on the business.

The purpose is to evaluate the opportunity and ensure everything relevant is known about it.

Here are the basic steps to perform diligence:

Market -- this includes the target market and its size and segmentation.

It’s important to understand the current state of the market and the competition.

Is the market size large and growing, and is the competition fragmented or concentrated?

People -- this includes the founder, CEO, and other C-level people.

It’s important to know the experience and background of the team.

Do they have the skills necessary for the startup to succeed?

Financials -- this includes the cash runway, current revenue traction, and fundraising.

It’s important to know the startup has sufficient cash and time to achieve its objectives.

Does the fundraising match the stage of business, and will it be enough to go to the next level?

Product -- this includes the technology base, the core product, and secondary products.

It’s important to know the current state of the product, including features, position in the market, and competitive advantage.

Will the product win enough customers to achieve the financial forecast?

Legal -- this includes the legal entity and intellectual property.

It’s important to know what protection the business has and what legal entity it currently holds.

Will this give the business enough protection to achieve a place in the market?

Consider these basic steps in your due diligence process.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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