Thursday January 12, 2017 0 comments
By Peter Adams
Rockies Venture Club
Many founders enter into due diligence kicking and screaming. They fight the process and in doing so discredit themselves and they lose a huge opportunity.
Going through due diligence is a lot of work. If you’re a CEO/Founder, don’t think of that work as being something “extra” or separate from your actual job. Engaging in due diligence IS your job. Just like fundraising, hiring people, delivering product, getting your first clients and all of the other stuff you have to do.
But rather than thinking about due diligence as a pain, why not think of it as free consulting?
Due diligence involves poking and prodding at every aspect of your business plan and testing its validity. Yes, this is something you should have done already, but there’s nothing like a horde of angel investors asking questions to make sure that you’ve not left any stone unturned.
I’ve seen many companies go through due diligence only to pivot or to tighten up their strategy before the deal is finally done. The result can be months or years of saved time that is not spent spinning your wheels on the second or third best strategy before you finally figure out what you should be doing. Companies that come out of due diligence are generally stronger, smarter and faster than those who are still out there pitching and looking for funding.
If you’ve got an incomplete plan and your investors ask you to create a proforma, or do some market research, then you’re going to be doing something that you should have done before you ever pitched in the first place. Be glad that investors are still interested, even though you had the audacity to pitch to them with only a half-baked strategy which represents a significantly higher risk to you and to them. Be thankful that they are willing to work with you through the process of doing the work that you really should have done in the first place.
The companies that do best in due diligence have started with the due diligence checklist and made sure that they had everything in place before pitching. If you’re that kind of company, then great. If not, then get ready to welcome the process of putting those things together in a scramble as quickly as possible for investors and then be ready to actively listen to and respond to their critiques!