12 Due diligence—an exam you must pass
- What is due diligence? Why is it needed? Who is it for?
- What does a comprehensive due diligence checklist look like? Streamline the process with readiness
- How can setting up a data room dramatically streamline the DD process for you and investors?
Due diligence is a critical process that occurs prior to any financing or exit. It enables the prospective investors (or buyers) to thoroughly assess you, your team, and your company so they know exactly what they are getting for their money. In this anecdote you will see what kind of information they will need and how best to give it to them. There are some actionable steps outlined here that it would be prudent for you to get on top of long before that first investor says they want to start the process.
12.1 What due diligence means
Due diligence is a very old term, going back 500 years. In the literal sense, it means “requisite effort.” Due diligence has extended its reach into business contexts, to apply requisite effort before engaging in a financial transaction.
Definition
Due diligence means a thorough investigation a prospective buyer conducts to evaluate a company’s complete financial picture, including assets, liabilities, and commercial potential.