The Due Diligence Course Makes Your Company Investable
Companies must be ever ready to receive an investment.
Pitching opportunities do not come by easily and entrepreneurs must ensure they are ready (in terms of their compliance status and completeness of paperwork) support the representations made during the pitches.
It takes 3 - 9 months to pitch, negotiate and plan an investment from an Angel Investor or a Venture Capitalist.
FAQ about Due Diligence (DD):
1. The investor and I have great chemistry. There is no need for paperwork or Due Diligence(DD).
- Wrong. A seasoned investor will not disregard DD. He is accountable to his own investors and partners. A lack of paperwork will cause misunderstandings and rifts down the road.
2. DD serves the investor and is a chore to the investee.
- Wrong. DD serves both parties. The investee can exploit it to find out more about the investor as well. The DD is also a form of insurance for the investee, to add defence to his position in the event of claims of misrepresentation by the investor.
3. The investment is in one lump sum.
- Wrong. There is always a schedule that plans out when the next tranches of cash are released. A salient item in the DD is the Cashflow Forecast check.
4. My advisor who is an investment-banker/lawyer/accountant/entrepreneur values us at $x-millions. This valuation is fair.
- Wrong. The DD will reveal what is considered fair.
5. I do not know how to value my company. What do you, as the prospective investor, think my company is worth?
- The company's worth can be estimated from the DD which will involves going through roadmaps and forecasts. Until then, it is hard to value a company.
6. The investor is going to handhold, assist and mentor me.
- Maybe, but only to a certain extent. He or she has a full time job already and is not going to do your work. You are expected to make the business work in accordance to the roadmaps the company based their valuation on.
7. The investment will arrive within weeks.
- Wrong. It can take 3 - 9 months. Or not at all if something throws it off-course.
More on Funding Myths here.