Due diligence is the process of analyzing a startup company's chances for success. This process is the primary job of an analyst and makes up the core of the job. But it is also a highly valuable process to understand if you want to play any part in the entire startup ecosystem. This class will cover every aspect of due lignite and the way that we conduct it at Wasabi Ventures. This presentation is part of the Wasabi Ventures Academy. If you are interested in taking classes, email wvacademy AT wasabiventures.com

1. Basics of Tactical Due Diligence
An Innovative And Dynamic Approach To Venture Capital And Incubation

2. What Is Due Diligence?
Official Answer: Research determining if a company is a sound investment
Unofficial Answer: Figuring out if there is any chance we can say “yes”
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Interviews Web research Talking to friends
and enemies
WHAT IT ENTAILS:

3. Due Diligence Fundamentals
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NOTE: Lots of details on this in the Training Workspace
FIGURING OUT FOUR KEY AREAS
PEOPLE MARKET/TRACTIONPRODUCT DEAL TERMS

4. Things To Get Before You Get On An Interview Call
Pitch Deck and/or
Executive Summary
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NOTE: Great resources on the Training Workspace for making a list of gap questions and
also how to review a deck.
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List of things that are missing
that you will need to ask for
from the founder
List of questions that
will fill in the gaps
Understanding of the team
and their backgrounds

5. Asking The 5 Trap Questions
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Meant to really get all of the details you need from the
founder’s vision
Questions that are at the core of an Early Stage startup
Answering them in a competent way is more important than
the answer

6. Question #1: Tell Me About Your Team
How Many People Are There?
Answer has to be less than 10
How Are The People
Compensated?
Equity?
Cash?
Both?
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Do They Cover All Functional Areas?
Any engineers involved?
Any business folks?
Have They Ever Been A Part Of A
Startup Before?
Do They Have Other Jobs?
NOT A RED FLAG, we actually like it!

7. Question #2: What Is Your Cap Structure?
How Many Shareholders Do They Have?
Should only be held by the founders if it is a seed round or incubation candidate.
Can’t have more than 10 if it is an A round.
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Who are the non-founder shareholders?
Relatives?
Friends of ours?

8. Question #3: How Do You Plan to Make Money?
Are they already making money?
If so, GOOD! How much and how did they make it?
If not, does it make sense what they say?
Red Flag Answers
Advertising?
“We aren’t sure”
“It should just happen because our product is so cool.”
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9. Question #4: Who Do You Consider Your Biggest Competitors?
RED FLAGS:
“We really have no competitors.”
“We are doing something that has never been done.”
“Lots of people are in this space, but we are just going to be better.”
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Do they understand their competitive market?
Are they experienced enough to have looked at the WHOLE market?

10. Question #5: How Much Money Are You Looking To Raise?
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Only applicable if it is an investment due diligence.
Do they have a lead investor and if so, who is it?
If it is less than $100K, probably not a good investment but could be a
good incubation candidate.
Is the $$ over $1MM, if so, probably not that interesting to us.

11. Learning The Easy “No’s”
Already raised and spent more
than $200K and have no paying
customers or revenue sources
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3Team is not all geographically
located together
No one on the team is technical
and they are paying cash for
engineering
NOTE: This could make them a
perfect candidate for incubation.
Any piece of data they give
you that you are 100% sure
is a lie

12. Few Key Thoughts
You should be
looking for a reason
to say “no”
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Be conscientious of
time, it is the most
important
commodity for a
startup
If you don’t
understand
something, ask
Always trust your
gut