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The way to create a due diligence highway map for Sequence B traders • TechCrunch


I beforehand wrote concerning the “holy trinity” of supplies that startups ought to have of their Sequence B information room: memo, deck and forecast. These three key paperwork ought to do the heavy lifting of capturing consideration and speaking data throughout the partnership with excessive constancy.

Now, I need to spotlight how founders can tie these supplies collectively for traders. If achieved nicely, these supplies, together with numerous cellphone calls and shows, will create the blueprint and spine for an in-depth Sequence B due diligence course of.

This blueprint is essential as a result of somebody will seemingly learn each single doc in your information room, and you do not need them to get misplaced. As an alternative, you need to make their job very straightforward. The following set of supplies falls squarely beneath the “decrease work” goal. By making issues straightforward, you improve the probabilities of the result being in your favor.

Sequence B corporations usually have gross sales, detailed price breakdowns, forecast actualization information, patents, board shows and extra. There’s quite a bit of knowledge to go over as a result of you’ve gotten been round for lots longer than a seed stage or Sequence An organization.

The perfect offense is a powerful due diligence questionnaire

Don’t make your information room so sophisticated that traders can’t discover their method out of the small print into accepting your arguments.

As an investor, I’m shocked that I don’t see DDQs extra usually. To not be confused with a authorized DDQ, this DDQ is commonly a 60- to 80-page doc divided into sections and answering questions that traders will invariably ask.

Some questions shall be simple. For instance:

  • When and the way was the corporate based?
  • Please talk about the corporate’s imaginative and prescient and values.
  • What number of workers does the corporate at present make use of?
  • Please summarize the related experience and expertise of the administration crew.

The DDQ affords reference information for such easy questions. It additionally ought to embrace some preemptive questions that traders wish to ask, resembling:

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