EBAN Due Diligence Guidebook for Angel Investors

• March 27, 2024

In the realm of investment, due diligence stands as a critical process, ensuring informed decisions and mitigating risks. In this document, we present key insights gleaned from a comprehensive due diligence exercise aimed at providing clarity and guidance in investment endeavors.

1. Summary

The primary objective of this document is to furnish a structured template for crafting a due diligence report, supplemented by a repertoire of pertinent questions and avenues for inquiry. Recognizing the diverse nature of businesses, spanning various models, developmental stages, and trading histories, it is imperative to acknowledge that due diligence transcends mere checkbox exercises. Instead, it serves as a compass, delineating principal areas for scrutiny and serving as a launchpad for pertinent queries. Moreover, fostering consistency in the due diligence process facilitates comparative analysis for the investment committee across diverse investment opportunities.

2. Corporate Structure and Ownership

Delving into the corporate structure and ownership paradigm, the focus pivots towards discerning potential impediments or conflicts of interest stemming from ownership configurations. Scrutiny extends to shareholder objectives, potential conflicts, and subsidiary management. Essential documents encompass articles of association, shareholder agreements, and details of new investors.

3. Financial

A meticulous examination of the financial landscape is imperative to gauge the company’s fiscal health and project future trajectories. This entails a thorough review of accounts, revenue streams, costs, assets, and intellectual property valuation. Additionally, an appraisal of debtors’ registers, tax compliance, and government grants underpins the financial assessment.

4. Business Plan

The viability and realism of the business plan form the crux of this segment. Critical evaluation of key assumptions, competitive positioning, revenue projections, and intellectual property strategies underscore the due diligence process. Scrutiny extends to market strategies, sales evolution, and contractual arrangements with third-party channels.

5. Sales and Marketing

Efficient utilization and protection of assets are paramount in ensuring sustained business growth. A meticulous review of owned technology, intellectual property portfolios, and contractual obligations elucidates the asset’s value and safeguarding measures.

6. Assets

The competency and retention of human capital are pivotal for operational efficacy and future scalability. Scrutiny encompasses management competencies, succession planning, staff turnover, and intellectual property stewardship.

7. Management and Staff

The operational framework and governance mechanisms warrant meticulous scrutiny to ensure alignment with growth trajectories. Comprehensive documentation and delineation of responsibilities, coupled with an awareness of supplier dependencies, fortify operational resilience.

8. Operations

Anticipating and mitigating potential risks is central to prudent investment decision-making. A holistic assessment of risks, mitigation strategies, and intellectual property enforcement mechanisms aids in delineating potential pitfalls and devising proactive measures.

9. Intellectual Property Checklist

Understanding and safeguarding intellectual property assets are critical imperatives in the due diligence process. Scrutiny extends to non-standard legal agreements, intellectual property enforcement strategies, and risk mitigation measures.

10. Legal

A judicious assessment of legal obligations and risks offers valuable insights into the company’s resilience and mitigation strategies. Awareness of non-competition agreements, legal proceedings, and intellectual property infringement risks informs investment decisions.

In essence, this document serves as a compass, guiding stakeholders through the intricate terrain of due diligence, offering clarity, and instilling confidence in investment endeavors. By leveraging these insights, stakeholders can navigate the investment landscape with prudence and foresight, ensuring informed decisions and mitigating risks.

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