Angel_Guidebook_-_Due_Diligence_Questions.pdf

Angel_Guidebook_-_Due_Diligence_Questions.pdf - APPENDIX 8...

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8.1 CORPORATE STRUCTURE AND GOVERNANCE (REVIEW DOCUMENTS AND INTERVIEW MANAGEMENT, BOARD, AND ADVISORS) / What is the company’s corporate structure? C corp., S corp., LLC or LP? Does this model allow for a liquidity event and/or return on investment? / Is there an exit strategy? / Is the corporate structure overly complicated? If so, why, and might it be simplified? / How many existing shareholders? Too numerous, and, if so, why? / Does the corporate structure fit with the business model? / Does the corporate structure allow for growth? / What is the founder share allocation? Do they have a large enough stake to have the incentive to succeed, but not so large as to ignore board and other advisors? Is the founders’ stock vested over time? / Who is on the board of directors? Do they have the right background for the company? Is there a sufficient number of outside directors? How are board members compensated? / Does the company have a board of advisors and, if so, who is on the board? Do the advisors actively participate in the company’s development? How are advisors compensated? / Has the company been involved in any litigation or been threatened with litigation? / Does the company have all required permits and licenses? FINANCIAL ASSUMPTIONS AND REVENUE SOURCES (REVIEW ALL FINANCIAL DOCUMENTS) / Has the company completed one-, three- and five-year financial projections? / Have the financial documents been properly developed according to applicable accounting rules? / Has the company used an outside, independent accounting firm to compile, review, or audit financials? A P P E N D I X 8 I S S U E S T O C O N S I D E R I N D U E D I L I G E N C E
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8.2 / How good are the assumptions? (rate of growth, acceptance rate, pricing, multiple revenue streams, costs) / Are revenues realistic?
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