Checklist "due diligence" for startups and entrepreneurs

due diligence












Investors, sean Business Angels, o Venture Capital, before placing your money in a startup, generally verifies the following.

First, base is the existence of a business with a future. For this, the following points are checked:

1.- Product or service: Is it a product for which there is potential demand?

2.- Customers: Is there enough volume of customers? Is there a clear value proposition for customers? Is there a market need is covered? Is the market large enough? Is the market growing? Having stable demand or a fad?

3.- Prices: Have you determined the prices of products? Will customers buy at these prices? Do these prices, the income support and an attractive margin?

4.-Management team: Does the team have the ability to carry out the project? Have you identified potential needs to be completed in the same?

5.- Competitive advantages and barriers to entry: What differentiates the product or service offered by competitors? What is the competitive advantage? Are there barriers that hinder competition entry?

6.- Financial needs: Have you identified capital needs? Is there a reasonable plan to 3 year view?

7.- Exit Strategy: Any chance of a good start business? How profitable could be obtained on the investment?

In addition to these issues, are usually also perform accounting and auditing. The main issues are the following verification:


Statutes, Option plans, compliance with trade obligations (deposit accounts).

Organization and members of the Board of Directors.

CV and references of key people in the company.

Partners signed agreements and other agreements between shareholders to vote syndication, or buyout.

Other contracts or agreements with partners, board members, external advisors to companies.


Commitments and responsible remuneration, directors and board.

Current status of capital distribution:

Book Partner. Treasury


Accounts of the past three years.

Financial plan for the next 3 years old: Estimated Cash Flows, balance sheets and income statements.

Reports of internal and external auditors of the last 3 years old.

Accounts receivable, credit policies and risk.

Accounts payable


Loans and guarantees assumed


Paying taxes in recent 5 years old.

Situation "up" on the income tax and withholding.


Supply contracts and assumed distribution.

Other contracts that can bind the company. Potential problems with suppliers. Maintenance contracts. Equipment rentals.

Contracts with customers and other third parties such as consultants, Affiliate, advertising, promotion or any other activity related to electronic commerce. Joint ventures, Joint Development Agreements. Exclusive agreements. Other pacts Merger, acquisitions or sales relating to subsidiaries, divisions, product lines or other relevant assets.

Contracts or loans made to key people in the company or companies in which they, directly or indirectly, participate.

Bank contracts:

Commitments to financial institutions. Discounting, guarantees.

Hiring Company:

Resolutions adopted, association and state convention. Pension Plans, shields contracts, compensation agreed. Contracts and work history. Contracts on layoffs, from improper or made in recent 3 years old. Voluntary redundancy produced.

Outsourcing and potential liabilities carried by the same.

Benefits and bonus plans, Commissions, and other payments in kind.

Track payment obligations to the people in the company, and with Social Security.

Compliance with the requirements for the prevention of occupational hazards and safety plans.


"Testimonials" Customer.

Press releases concerning the company.


Description of Operations, with partners or collaborators available. Ability to meet the accounting systems performing the necessary operations.

Geographical scope:

Locations where the company is working, both company locations, as places where its products are sold.


Description of the sales force, with its structure and compensation systems.

Pending Litigation:

Status of litigation and possible outcomes.

Powers granted.

Industrial and intellectual property:

Brands, patents, Utility Models, internet domains, logos, own brand names.

Ditto of distributed or licensed.

Potential litigation relating thereto.

Confidentiality agreements with employees and third parties

Situation of Internet domains:

Monthly visits, number and quality of links, Google penalties, number and quality of contacts in social networks and evolution of these magnitudes.

Property in:

Real Estate Company.

Legal status of the premises in which it operates. Leases where appropriate. Options to buy or sell. Operaciones de sale and lease back.

Situation of movable assets of the company:

Inventories, Maintenance Plan, acquisition cost of the asset value and accumulated depreciation.


Software developed in-house and external policy and amortization.


Situation insurance company.

Specific sector regulations:

Compliance with the specific rules that may apply at the sector in which it operates.

Communications received from public agencies in charge of these in the past 3 years old.

This list can be further refined, but basically, verification can avoid the main problems that arise when relying only on good faith or intuition.

What other points included in the list?

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