How to create a due diligence road map for Series B investors

Gaetano CrupiContributor
Gaetano Crupi is a partner at venture capital firm Prime Movers Lab. He serves on the boards of OCEANIX, Atom Computing, Conscious Cultures and MycoWorks.

I previously wrote about the “holy trinity” of materials that startups should have in their Series B data room: memo, deck and forecast. These three key documents should do the heavy lifting of capturing attention and communicating information across the partnership with high fidelity.

Now, I want to highlight how founders can tie these materials together for investors. If done well, these materials, along with various phone calls and presentations, will create the blueprint and backbone for an in-depth Series B due diligence process.

This blueprint is important because someone will likely read every single document in your data room, and you do not want them to get lost. Instead, you want to make their job very easy. The next set of materials falls squarely under the “minimize work” objective. By making things easy, you increase the chances of the outcome being in your favor.

Series B companies generally have sales, detailed cost breakdowns, forecast actualization records, patents, board presentations and more. There is a lot of information to go over because you have been around for a lot longer than a seed stage or Series A company.

The best offense is a strong due diligence questionnaire

Don’t make your data room so complicated that investors can’t find their way out of the details into accepting your arguments.

As an investor, I’m shocked that I don’t see DDQs more often. Not to be confused with a legal DDQ, this DDQ is often a 60- to 80-page document divided into sections and answering questions that investors will invariably ask.

Some questions will be straightforward. For example:

  • When and how was the company founded?
  • Please discuss the company’s vision and values.
  • How many employees does the company currently employ?
  • Please summarize the relevant expertise and experience of the management team.

The DDQ offers a good reference guide for such simple questions. It also should include some preemptive questions that investors like to ask, such as:

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