Companies who progress through the 2nd pitch event in CTAN’s funding cycle undergo 2 weeks of due diligence. The first thing we request of these companies is to fill out the below Due Diligence Checklist. For a downloadable Word version of the Checklist, click here.

Company

  1. Describe your company’s founding story and why you started this business.
  2. Is there any past, present, or pending legal action against your company? If yes, please describe.
  3. Has the company taken on any debt? If yes, please describe.
  4. What is your company’s legal structure, and in what state? (Delaware C Corp, Texas LLC, etc.)

Team

  1. List your team members, their roles (CEO, CTO, etc.), and summarize their backgrounds.
  2. Provide 2-3 professional references for the CEO.
  3. What is the CEO’s credit score?
  4. What prior startup experience does your team have, what role did each of them play, and what happened to the company?
  5. What gaps or needs does your team have (Engineering, Sales, etc.)? And do you have prospective hires ready to fill those roles?
  6. What are the salaries of your team members, and how will they change after closing this fundraising round?
  7. Who is on your Board of Directors? Please provide their backgrounds.
  8. Who are your Advisors? Please provide their backgrounds.

Product and IP

  1. Describe your product or service.
  2. Provide patent numbers, if any.
  3. What is your product’s “secret sauce”?
  4. What is the current status of your product’s (or service’s) development?
  5. What future product or service developments do you plan to do? (Additional features, etc.)

Competition

  1. Who are your direct competitors?
  2. Who are your indirect competitors?
  3. What is your competitive advantage?
  4. Provide contact info of technical experts you’ve worked with who can comment on your business, if available.

Market

  1. What is your beachhead market, how big is the opportunity, and how fast is it growing?
  2. What is changing in your market that makes this such a great opportunity for your company? (i.e., why now?)
  3. What other markets do you plan to expand into, if any?

Go to Market Strategy

  1. How do you intend to deliver your product or service to the market?
  2. What is your pricing model?
  3. Who do you need to sell to in this market? (Key channel partners, decision makers, etc.)
  4. What is your sales cycle timeline?
  5. Provide a list of existing customers / beta users, if any.
  6. Provide contact information of 3-5 customers we can call for a reference.
  7. What is your current and historical revenue?
  8. What is your customer churn rate?

Exit Strategy

  1. Who are possible acquirers?
  2. Where do you need to be to get on their radar? ($10M in annual revenue, 1M users, etc.)
  3. What are some recent acquisitions in this space?
  4. What are typical acquisition multiples in this space?

Proposed Deal Terms

  1. How much are you raising, and what are the terms of your raise?
  2. How would you justify your valuation?
  3. Provide a breakdown of how you plan to use the funds.
  4. What prior raises have you done? Please include the amount, terms, and short description of who the investors were – Friends/Family, Strategic Investor, etc.
  5. If you plan to raise a future round, when, how much, and what would those funds be used for?
  6. How much cash does your company currently have, and how long will it last you?
  7. What is your current monthly burn rate?
  8. Who is currently soft-circled to participate in this round?
  9. Who else are you pitching to?

Document Request

  1. Annual financial statements since formation (Income Statement, Cash Flow, and Balance Sheet)
  2. All contracts entered into by the company
  3. Resumes of management team
  4. Resumes of future hires (if available)
  5. Spreadsheet showing your sales to date
  6. Financial model projected 18 months out
  7. Copies of closing docs from prior rounds (if applicable)
  8. Current Capitalization Table
  9. Word Doc version of patents or provisional patents (if applicable)

If you have questions on any of these topics, please contact Mark Thorsen, CTAN’s Due Diligence Associate: mark@centraltexasangelnetwork.com