A comprehensive workflow for early-stage venture capital due diligence ensuring thorough evaluation of startups before investment.
1
Identify Potential Investment Opportunity
2
Collect Basic Information about Startup
3
Conduct Preliminary Screening of Startup
4
Approval: Preliminary Screening Result
5
Conduct Detailed Analysis of Startup's Business Model
6
Evaluate Market Potential and Competition
7
Assess the Startup's Management Team
8
Examine Financial Statements and Projections
9
Perform Industry Analysis
10
Seek Independent Expert Opinions
11
Conduct Legal Checks
12
Perform Technical Assessment of the Product or Service
13
Assess Risks and Identify Mitigation Strategies
14
Approval: Risk Assessment Result
15
Evaluate Startup Valuation
16
Draft Investment Proposal
17
Approval: Investment Proposal
18
Prepare Term Sheet
19
Conduct Final Negotiations
20
Complete Investment Transaction
Identify Potential Investment Opportunity
This task involves researching and identifying potential investment opportunities in the early-stage venture capital sector. By leveraging your network and conducting market research, you can identify startups that align with your investment criteria. The desired result is to create a list of promising startups for further due diligence. Do you have any previous contacts or industry expertise that can aid in this process? What resources or tools will you use for market research?
1
Technology
2
Healthcare
3
E-commerce
4
SaaS
5
Fintech
Collect Basic Information about Startup
In order to evaluate a startup's potential, basic information needs to be collected. This task involves reaching out to the startup and gathering their basic details, such as business description, founder information, and contact details. The desired result is to have a well-rounded understanding of the startup's background. How will you initiate contact with the startup? What key details do you need to collect in order to evaluate their potential?
1
Harvard University
2
Stanford University
3
Massachusetts Institute of Technology
4
Oxford University
5
University of Cambridge
Conduct Preliminary Screening of Startup
This task involves conducting a preliminary screening of the startup to assess its viability and potential. By reviewing the startup's pitch deck, website, and online presence, you can get an initial sense of their business model, market fit, and traction. The desired result is to determine if the startup meets the basic criteria for further due diligence. What key factors will you consider during the preliminary screening? Have you identified any potential red flags or concerns?
1
Pre-product
2
Beta launch
3
Early revenue
4
Scaling
1
Market leader
2
Moderate competition
3
Niche market
4
Potential disruptors
5
No direct competition
1
Strong founding team
2
Scalable business model
3
Addressable market
4
Product-market fit
5
Tangible competitive advantage
Approval: Preliminary Screening Result
Will be submitted for approval:
Identify Potential Investment Opportunity
Will be submitted
Collect Basic Information about Startup
Will be submitted
Conduct Preliminary Screening of Startup
Will be submitted
Conduct Detailed Analysis of Startup's Business Model
This task involves conducting a detailed analysis of the startup's business model. By examining their revenue streams, cost structure, and value proposition, you can assess the sustainability and profitability of their business. The desired result is to have a comprehensive understanding of how the startup generates and monetizes value. What key aspects of the business model will you focus on during the analysis? How will you assess its scalability and potential for growth?
1
Highly scalable
2
Moderately scalable
3
Limited scalability
Evaluate Market Potential and Competition
This task involves evaluating the market potential and competition for the startup's product or service. By conducting market research and analyzing industry trends, you can assess the size of the market, growth potential, and competitive landscape. The desired result is to determine if there is a viable market for the startup's offering and if they have a competitive advantage. What key market research methods will you employ? How will you assess the startup's differentiation and competitive positioning?
1
Slow growth
2
Moderate growth
3
High growth
1
Innovative technology
2
Strong brand presence
3
Superior customer service
4
Cost advantage
5
Network effect
Assess the Startup's Management Team
This task involves assessing the startup's management team to evaluate their experience, skills, and ability to execute the business plan. By reviewing their resumes, LinkedIn profiles, and conducting interviews, you can gain insights into their leadership capabilities. The desired result is to determine if the management team has the necessary expertise to drive the startup's success. What key qualities and experiences will you look for in the management team? How will you assess their track record and leadership skills?
1
Industry expertise
2
Track record of success
3
Ability to attract talent
4
Strong leadership skills
5
Entrepreneurial mindset
Examine Financial Statements and Projections
This task involves examining the startup's financial statements and projections to assess their financial health and future prospects. By analyzing their income statements, balance sheets, and cash flow statements, you can evaluate their revenue generation, profitability, and cash management. The desired result is to determine if the startup has a sustainable financial model. What key financial metrics will you focus on during the analysis? How will you assess the startup's financial viability and growth potential?
1
Profitable
2
Break-even
3
Loss-making
1
High growth potential
2
Moderate growth potential
3
Limited growth potential
Perform Industry Analysis
This task involves performing an industry analysis to evaluate the startup's market positioning and competitive landscape. By researching industry trends, competitors, and customer demands, you can gain insights into the industry dynamics and potential challenges. The desired result is to assess the startup's fit within the industry and identify growth opportunities. How will you conduct the industry analysis? What key industry insights will you aim to uncover?
1
Emerging technologies
2
Changing consumer preferences
3
Regulatory developments
4
Industry consolidation
5
Global market expansion
Seek Independent Expert Opinions
This task involves seeking independent expert opinions to gain further insights and validation for the startup's potential. By consulting industry experts, advisors, or conducting peer reviews, you can benefit from their expertise and mitigate biases. The desired result is to obtain objective and informed opinions on the startup's viability. Who are the experts or advisors you will seek opinions from? What key questions or aspects of the startup will you ask them to evaluate?
1
Technology
2
Finance
3
Marketing
4
Operations
5
Industry-specific knowledge
Conduct Legal Checks
This task involves conducting legal checks to assess the startup's compliance with laws, regulations, and intellectual property rights. By reviewing legal documents, conducting due diligence, and seeking legal counsel, you can minimize legal risks and protect your investment. The desired result is to ensure the startup has proper legal foundations. What key legal aspects will you focus on during the checks? Have you identified any potential legal issues or intellectual property infringements?
1
Compliant
2
Some compliance issues
3
Non-compliant
Perform Technical Assessment of the Product or Service
This task involves performing a technical assessment of the startup's product or service to evaluate its feasibility and quality. By analyzing the technology stack, scalability, and user experience, you can assess the startup's technical capabilities. The desired result is to determine if the product or service meets the required standards. What key technical aspects will you focus on during the assessment? How will you evaluate the scalability and reliability of the technology?
1
Highly scalable
2
Moderately scalable
3
Limited scalability
Assess Risks and Identify Mitigation Strategies
This task involves assessing the risks associated with the startup and identifying strategies to mitigate them. By conducting a risk analysis and brainstorming potential solutions, you can minimize the impact of risks on the investment. The desired result is to have a comprehensive understanding of the risks involved and a plan to address them. What key risks do you foresee in investing in the startup? How will you prioritize and address these risks?
Approval: Risk Assessment Result
Will be submitted for approval:
Conduct Detailed Analysis of Startup's Business Model
Will be submitted
Evaluate Market Potential and Competition
Will be submitted
Assess the Startup's Management Team
Will be submitted
Examine Financial Statements and Projections
Will be submitted
Perform Industry Analysis
Will be submitted
Seek Independent Expert Opinions
Will be submitted
Conduct Legal Checks
Will be submitted
Perform Technical Assessment of the Product or Service
Will be submitted
Assess Risks and Identify Mitigation Strategies
Will be submitted
Evaluate Startup Valuation
This task involves evaluating the startup's valuation to determine the investment amount and equity stake. By analyzing financial projections, market comparables, and industry benchmarks, you can assess the fair value of the startup. The desired result is to determine a reasonable valuation that aligns with the startup's potential and market conditions. What valuation methods will you employ during the evaluation? How will you negotiate and validate the valuation with the startup?
1
Discounted Cash Flow (DCF)
2
Comparable Company Analysis
3
Venture Capital Method
4
First Chicago Method
5
Berkus Method
Draft Investment Proposal
This task involves drafting an investment proposal to present the key details and terms of the potential investment to the startup. By summarizing the investment opportunity, terms, and conditions, you can effectively communicate the offer to the startup. The desired result is to have a comprehensive and compelling investment proposal. What key details and terms will you include in the proposal? How will you structure and present the information?
Approval: Investment Proposal
Will be submitted for approval:
Evaluate Startup Valuation
Will be submitted
Draft Investment Proposal
Will be submitted
Prepare Term Sheet
This task involves preparing a term sheet to document the key terms and conditions of the potential investment. By outlining the investment amount, valuation, equity stake, and other terms, you can formalize the offer to the startup. The desired result is to have a clear and concise term sheet for further negotiations. What key terms and conditions will you include in the term sheet? How will you structure and format the document?
Conduct Final Negotiations
This task involves conducting final negotiations with the startup to finalize the investment terms and conditions. By engaging in open and transparent discussions, you can address any concerns or requests from both parties. The desired result is to reach an agreement on the investment terms and conditions. What key negotiation points do you anticipate? How will you manage any potential conflicts or disagreements?
Complete Investment Transaction
This task involves completing the investment transaction by finalizing the legal and financial aspects. By engaging legal counsel and executing the necessary documents, you can legally formalize the investment. The desired result is to successfully complete the investment transaction and initiate the partnership with the startup. What key documents and agreements will be required for the transaction? How will you ensure a smooth and efficient process?
