The Art of Startup Fundraising

5The Due Diligence Package

Once your pitch collateral starts working, you need to be prepared to back it up and immediately move forward.

Bloomberg Business reports that two thirds of the deals made on the TV show Shark Tank end up falling apart. ¹ The funding never happens. This can often be because the due diligence blows holes in the pitch, or other red flags pop up. Sometimes entrepreneurs say that investors simply never show up and follow through. In one case, an entrepreneur who was offered $1 million wasn't prepared to sign at that exact moment, and within 30 days the deal unraveled.

The time to polish your due diligence package is now, not after you begin generating interest. Some of the items in your package can be created and commissioned only by your organization. Others can be hunted down by prospective investors. But do you really want to be the startup that is difficult to finance? Do you want to leave it up to chance or Google to determine what they see, and if it is you or the next startup in line to actually get funded? No? Then make sure you have a strong due diligence package ready to roll out.

Some experienced investors will have a comprehensive checklist of items they need, or things they need to review. Others, especially inexperienced new angels, may request these items piece by piece. That can drag out the process, and potentially sabotage the entire round. It is far better to have a comprehensive package to provide, and this will say a lot about your ...