The Venture Capital Due Diligence Checklist - Page 1

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V. THE VENTURE CAPITAL DUE DILIGENCE CHECKLIST

Below is a sample of the extensive amount of information that venture capital firms are going to require in order to "just consider" funding your capital request. The burden of providing all this information is going to be on you and your management team. Having been through this process a few times myself, I can tell you from personal experience that it is very painful and extremely time consuming. You will end up putting your business on hold while you proceed through this maze. Can you afford it?

1. Corporate Documents:

Articles of Incorporation
Bylaws and operating agreements
Shareholder agreements
Minutes of Board of Directors and Shareholder meetings
All documents furnished to shareholders and directors
Certificates from all states and jurisdictions where the company does business

2. Previous Securities Issuance:

Copies of stock certificates, warrants and option agreements
Complete Stockholder contact information
Number of outstanding shares, dates of issuance, and percent ownership
All outstanding preferred stock, including covenants
All outstanding options, warrants or convertible securities
Employee stock benefit programs; stock options, stock purchases or others

3. Financial Information

Audited financial statements since inception
Income statements, balance sheets, cash flow statements
Records of all changes in equity position
Accounting methods and practices
Company prepared monthly or quarterly statements
A three year budget and financial projections
A complete and current business plan
Accounts receivable aging and accounts payable aging
Product or service pricing plans and policies
Revenue and gross margins by product or service
Extraordinary income or expense details
Explanation of any material write-downs or write-offs
A summary of all bad debt experiences
Details of any outstanding contingent liabilities
Accountant report on the company's financial condition

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