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Due diligence is an exhaustive research process that potential investors undertake when trying to determine whether, at what valuation, and under what terms to invest in a company. Beginning with the initial reading of the executive summary, due diligence processes can last as little as four weeks and extend as long as several months. The most intensive segment of the process typically takes place after the term sheet has been signed and before the exclusivity (or "no-shop") period has expired.
During due diligence, investors may ask for financial statements, budgets, legal documents, operations schedules and plan, and sales and marketing materials, and request to have meetings with your board, management team, and staff members. They may ask to speak to existing and former clients, vendors, and investors. In essence, anything is game.
You can help the process go more smoothly by being organized, responsive, and honest and by asking the investor for a prioritized list of diligence items.
Insights and Pointers on Due Dilligence (3:07)
Attorney Mary Hildebrand shares insights and pointers on the due diligence process.