Due diligence refers to the comprehensive examination and assessment of a company prior to an investment, acquisition of a stake or takeover. The aim is to analyse all relevant information, identify risks and lay the foundations for a well-informed investment decision.
The term originates from English and essentially means „due care“. In the start-up and investment sector, due diligence is an integral part of almost every funding round and M&A transaction.
Typical areas covered by a due diligence review are:
- Financial position and key figures
- Business model and market potential
- legal structures and contracts
- Shareholder and Ownership Structures
- intellectual property and technologies
- Operational processes and organisation
Due diligence helps with this:
- To assess opportunities and risks realistically
- To validate company details
- to identify potential vulnerabilities
- To foster transparency between the parties
- to provide a basis for contract negotiations
For start-ups, the due diligence process can be an intensive phase, as investors often request detailed information on finances, strategy, product development and the legal framework.
Thorough preparation for due diligence increases the chances of a successful completion of the funding round and builds trust with potential investors.
innoWerft helps start-up founders to prepare professionally for due diligence processes, organise relevant documentation in a structured manner and take investors’ requirements into account at an early stage, in order to ensure that funding processes are carried out efficiently and successfully.