Young companies deal with a million moving parts, and typically without enough personnel bandwidth or financial resources to handle it all. Every bit of progress is thrilling, but founders are stretched thin, pushing as hard as possible for that next product milestone, that next investment, and paying bills for that next month of operating costs. While young companies focus a lot on the networking and pitching required to harness more funds, many founders don’t think about the practical process of what’s next: yes, the money will come in, but what stands in the way of that happening? Diligence can slow things down, whether in a simple investment round or full-blown M&A transaction. Founders who focus on prospective diligence from Day 1 have an easier time when that deal comes around, hard stop. Here are a few diligence items to focus on from Day 1.
As an overzealous pro tip: ask your attorneys for a model diligence request list really early in your company’s life cycle. Each list is customized for a given transaction, so any given list won’t necessarily be representative of the transactions you may choose down the line. That said, any list can give you a general sense of the scope and breadth of minutiae that buyers or investors may request. If there are terms or documents referenced in the list that you don’t know about, sit down with your attorneys and ask about them to gain the legal vocabulary you’ll need later.
Long story short: stay on top of your records, and I promise, you’ll thank yourself later. Now get back to building that company.