| You have presented your plan to the venture | | | | Intellectual property -- lists of any patents, |
| capital partners. It was well received and they | | | | pending patents, trademarks, copyrights, etc. as |
| have offer you a term-sheet. You have | | | | well as all claims and litigation by or against the |
| negotiated your major deal points and are ready | | | | Company regarding patents and patent |
| for the investment. Now the VC wants to | | | | infringement. |
| commence with due diligence. | | | | Financial and accounting matters -- Financial |
| Wait a minute... what was all that presenting and | | | | statements, preferably audited, over the past |
| talking to partners and scientific specialists? Wasn't | | | | three to five years, and copies of all documents |
| that due diligence? Well, yes, sort of. That was | | | | from previous financings, stock purchase |
| due diligence to make sure that the business | | | | agreements, shareholders agreements, etc. |
| model and technology were worthy of | | | | Legal and tax matters - all claims and litigation by |
| investment. Now they want to make sure your | | | | or against the Company including any issues with |
| company is. | | | | income or employment taxes. |
| Post term-sheet due diligence reviews your | | | | Acquisition, divestiture, or reorganization - any |
| corporation at a detailed level to make sure that | | | | documentation surrounding any acquisition, |
| you do not have any skeletons in the corporate | | | | divestiture, or reorganization in recent years. |
| closet. The venture capital firm wants to make | | | | Each venture capital firm will have its own list of |
| sure that they are not opening themselves up to | | | | due diligence needs. Even early in the process, |
| patent infringement litigation, employee disputes, | | | | you might ask the firm for its due diligence list so |
| or tax scandals. | | | | you can get a jump on what the firm might want. |
| The VC will usually want some form of the | | | | Often the list will include additional sections on |
| following information: | | | | product and sales plans, competitions, public |
| Corporate organization and history -- basically | | | | relations, and R&D. |
| your minute book plus any partnership | | | | From the date you receive the term-sheet to the |
| agreements or joint ventures. | | | | funding date will be six to eight weeks, possibly |
| Management and employee relations -- resumes | | | | more. Once you have committed to receiving |
| of management, descriptions of key personnel, | | | | funding from a VC, you do not want to get held |
| organizational charts, any changes or planned | | | | up because you are trying to locate documents |
| changes in management | | | | or make copies. |