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.
- Describe your company’s founding story and why you started this business.
- Is there any past, present, or pending legal action against your company? If yes, please describe.
- Has the company taken on any debt? If yes, please describe.
- What is your company’s legal structure, and in what state? (Delaware C Corp, Texas LLC, etc.)
- List your team members, their roles (CEO, CTO, etc.), and summarize their backgrounds.
- Provide 2-3 professional references for the CEO.
- What is the CEO’s credit score?
- What prior startup experience does your team have, what role did each of them play, and what happened to the company?
- What gaps or needs does your team have (Engineering, Sales, etc.)? And do you have prospective hires ready to fill those roles?
- What are the salaries of your team members, and how will they change after closing this fundraising round?
- Who is on your Board of Directors? Please provide their backgrounds.
- Who are your Advisors? Please provide their backgrounds.
Product and IP
- Describe your product or service.
- Provide patent numbers, if any.
- What is your product’s “secret sauce”?
- What is the current status of your product’s (or service’s) development?
- What future product or service developments do you plan to do? (Additional features, etc.)
- Who are your direct competitors?
- Who are your indirect competitors?
- What is your competitive advantage?
- Provide contact info of technical experts you’ve worked with who can comment on your business, if available.
- What is your beachhead market, how big is the opportunity, and how fast is it growing?
- What is changing in your market that makes this such a great opportunity for your company? (i.e., why now?)
- What other markets do you plan to expand into, if any?
Go to Market Strategy
- How do you intend to deliver your product or service to the market?
- What is your pricing model?
- Who do you need to sell to in this market? (Key channel partners, decision makers, etc.)
- What is your sales cycle timeline?
- Provide a list of existing customers / beta users, if any.
- Provide contact information of 3-5 customers we can call for a reference.
- What is your current and historical revenue?
- What is your customer churn rate?
- Who are possible acquirers?
- Where do you need to be to get on their radar? ($10M in annual revenue, 1M users, etc.)
- What are some recent acquisitions in this space?
- What are typical acquisition multiples in this space?
Proposed Deal Terms
- How much are you raising, and what are the terms of your raise?
- How would you justify your valuation?
- Provide a breakdown of how you plan to use the funds.
- What prior raises have you done? Please include the amount, terms, and short description of who the investors were – Friends/Family, Strategic Investor, etc.
- If you plan to raise a future round, when, how much, and what would those funds be used for?
- How much cash does your company currently have, and how long will it last you?
- What is your current monthly burn rate?
- Who is currently soft-circled to participate in this round?
- Who else are you pitching to?
- Annual financial statements since formation (Income Statement, Cash Flow, and Balance Sheet)
- All contracts entered into by the company
- Resumes of management team
- Resumes of future hires (if available)
- Spreadsheet showing your sales to date
- Financial model projected 18 months out
- Copies of closing docs from prior rounds (if applicable)
- Current Capitalization Table
- 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: firstname.lastname@example.org