VC Due Diligence Checklist

Due diligence for the venture capital sphere includes a complete examination and the entire analytical process based on which managers of venture funds and companies make investment decisions. This article will analyze VC due diligence checklist.

The purpose of due diligence in VC deals

In the modern economy, venture capital investments are an integral part of the development of the country’s innovative potential. Venture capital (VC) investments are a priority in the development of state policy in the country, acting as a “safety cushion” for new companies entering the venture capital market: they provide strategic growth and development of the company by financing their innovative activities. Venture capital provides a financial link in the innovation infrastructure that unites capital carriers and technology carriers, and it is he who solves the problem of financial insufficiency in the sector of starting innovative projects.

Deal preparation is the most important aspect of the venture capital investment process. Over time, the importance of preparation has increased as VC clients have become sophisticated. After the company comes to the attention of the venture capitalist, the verification process begins with the help of the due diligence procedure. This stage is the longest in venture investing, sometimes lasting up to 1.5 years, and ends with a final decision on the production of investments or refusal from them. All aspects of the state of the company and business are considered.

The venture capitalist has to expand the scope and sources of information available to him. This is due both to the fact that an entrepreneur can be expected to embellish the real situation and to the fact that he simply may not notice the problems that are significant from the point of view of the investor’s interests.

The knowledge gained during the due diligence process allows the venture manager to shape the structure of the transaction by including clauses in the agreement with shareholders that can significantly improve the investment results. The information obtained during due diligence is important to convince potential partners to join the deal.

Due diligence checklist for the venture capital investment process

The starting point of due diligence is the business plan of an innovative project, while it is important to understand the motivation of all participants in the transaction, to determine the existing and planned sales markets, the nature of the competition.

Most of the work during the procedure is usually done in specially-designed Virtual Data Rooms. It is a secure digital platform, that provides useful tools for collaboration between contractors as well as a reliable data repository.

Of course, in each specific case, there are specific features of conducting Due Diligence in these conditions, however, there are general approaches to solving this problem. VC due diligence checklist includes the following aspects:

  • obtaining and analyzing information in the public domain;
  • organization of requests to various authorities;
  • initiation of a tax audit (subject to the possibility of further use of the information received);
  • obtaining information from competitors;
  • participation in the inventory process,
  • obtaining insider information from the takeover target’s employees who are loyal to the takeover company.

Based on the results of such a study, if a positive decision is made, an investment offer is drawn up, which summarizes all the conclusions and formulates a proposal for the investment committee, which makes the final verdict.

The report should include at least the following sections:

  • Introduction
  • Summary of analysis results
  • Company history and market position
  • Organizational structure and staff
  • Accounting Principles and Information Systems
  • Business results
  • Net assets
  • Flow of funds
  • Tax
  • Financial forecast
  • Other questions.

VDR Software Download Process and Setting Up

The organization of teamwork through Data Room platforms significantly expands the range of opportunities for companies to implement their business tasks. This article is a guide for Data Room installation.

Virtual Data Room – a new era of collaboration

As the external environment becomes more uncertain and volatile, there is a growing need in organizations for increased adaptability. An increasing number of companies are beginning to transform their structure in the direction of networked forms of organization. The proliferation and development of networked organizations imply the widespread use of digital platforms of team models. One such solution is Virtual Data Room.

Data Room software allows you to model the company’s processes and automate their execution. It provides the ability to control work at all stages and quickly make improvements. The use of such digital platforms contributes to the growth of organizational transparency and the development of team models of work, which ultimately facilitates such a transformation.

The Data Room system has several important advantages:

  • thanks to working with this digital platform, each employee in the process of performing professional duties saves on average up to 30% of his working time. This significantly increases the productivity of the entire enterprise.
  • working with the Data Room applications is fairly straightforward and intuitive. Work training is carried out rather quickly and does not require much time and investment.
  • simplification of interaction between company employees. Thanks to various methods of communication, such as mail, chat, and other employees of the company, they quickly and easily exchange all the necessary information.

How to set up Data Room software?

A modern Data Room can be accessed via the browser, for example. So there is no need to install the service. You can also access your data on the go via the app. This allows you or your business partners to access your protected documents from anywhere with the help of an internet-enabled device,

So, there are several important steps for VDR software download. You have to book the corresponding license for this in your Data Room provider administration area for a fee – you, therefore, need admin rights in order to be able to book Data Rooms. To create a Data Room if the option is available, however, a full license with the appropriate authorization is sufficient.

In the user administration, you will find the menu item “Booking” – here you can get your Data Room license. To make the booking, first, go to the administration menu and then click on the three dots in the top right corner. Now click on “Booking” in the drop-down menu. On the next page select the menu item “Booking” again. Here you can add and reduce licenses, additional storage space, and Data Rooms. Confirm your selection by clicking on “Book for a fee” at the bottom right – done.

Next, you need to set up a Data Room. To do this, either create a new box or select an existing privacy box in which you are a member and for which you have administrative rights. When you create a new box, the new option “Data Room” is now available to you in addition to “Temporary Privacy Box” and “Privacy Box”.

Now select the menu item “Data Room” at the top. Here you can, for example, request a mandatory declaration of consent from all participants, which must be accepted before first access. In principle, the number of users in a data room is not limited.

Why Doing Business With Secure Online Data Rooms

Data Room solution is a trusted platform for company growth and business intelligence. In this article, we will discuss the main reasons businesses use software for making deals.

Data Room in the business sphere

Effective corporate communication is one of the main conditions for the successful operation of any enterprise. Wired and wireless telephony and multimedia communications systems, infrastructure solutions have long and firmly occupied an important place in the labor process of both multi-thousand corporations and small and medium-sized businesses. However, cloud communications via secure online Data Rooms came to the corporate sector relatively recently, and the degree of their penetration was low. Doubts about the security of these solutions, the need for additional investments, the complexity of the process of integration into the existing infrastructure – there were many obstacles on the way to unified communications. This changed in early 2020 when the coronavirus pandemic forced companies around the world to relocate their staff to remote work.

With the development of digital technologies and systems for managing the work of an enterprise, the introduction of a Virtual Data Room (VDR) for an enterprise is no longer an innovation and not a luxury, it is a real necessity aimed at meeting the needs of the enterprise. With the internationalization of business transactions, the demands on work processes are also increasing. For the first time, it is possible, among other things, to translate documents in real-time in the Data Room. A new platform shows how due diligence processes can be automated to a greater extent with the help of innovative features.

Data Room is it is an integrated platform for secure collaborative action. Complete access to information is easy to obtain from any computer or mobile device outside the company’s office, which allows for effective collaboration. The software brings together typically disparate and collaborative services such as email, time management, instant messaging, content management, collaborative workspaces, and online conferencing, and delivers them through standard client protocols, integrated web -services, and familiar desktop tools.

Why VDR platform?

Secure online Data Rooms offers a new paradigm for organizing collaboration at the enterprise level, which is built on a unified platform, consisting of a complete and sufficient set of integrated services. So, what are the reasons for using Data Room for business? Let`s analyze the benefits of this solution:

  • Collaboration between geographically dispersed teams. Despite recent advances in communications, there is still a disconnect between geographically dispersed enterprise teams. With the Data Room tool, team members can work anywhere, anytime without losing touch with their projects and colleagues using any of the integrated collaboration services.
  • The Data Room purchase is a monthly or yearly subscription in a different price range, so the product is available to almost any customer. Besides, almost all vendors offer a free trial.
  • The scope of the platform is wide. Companies from any field can benefit from the implementation of the VDR platform, since almost everywhere in modern business there is a need for communication, collaborative work on electronic documents, meetings, web conferences, etc. Government agencies, healthcare, real estate, pharmacy, mergers, and acquaintances are of the greatest interest.
  • Instant data retrieval. Data Room searches for messages, documents, images one by one or across all chats at once, instantly, regardless of the depth of the archive. This is achieved through the use of a distributed database: a search query is processed by many computational nodes at once.
  • Online – conferences. The online conference service provides operational meetings, including support for all aspects of voice conferences – recording and playback of messages. The service supports regular and restricted meetings.