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Why You Should Outsource Your Due Diligence

Published on Jul 01, 2021 by Jon Alvarado

Outsourcing Critical Processes Can Help Facilitate Sustained Growth

Outsourcing is a strategic tool used by many startups as they seek to leverage growth opportunities while keeping in-house staffs small — which promotes lean operations and helps teams focus on core outputs. As it is for many services — IT, security, and early-stage marketing — outsourcing due diligence can save startups months of late nights and added stress.

How do you know when it is time to outsource? Each startup will have key metrics that trip internal indicators pointing to the need for outsourcing, but in general, it will come when startups reach a point when their processes are strained and the quality of work tapers off as staff spread themselves too thin while also performing tasks they simply aren’t qualified for.

The Goal Of Due Diligence: Getting Investors To Write That Check

Due diligence for startups is the process by which an investor or buyer investigates business records that lead to support of a target value and learns if there are matters that require further investigation as a platform for a price renegotiation.

This is the step where startups can no longer rely on a fake-it-till-you-make-it strategy, and there can be substantial legal exposure, including criminal prosecution, for startups that misrepresent their business during due diligence.

During the due diligence process, investors will be looking for several key pieces of information, including: financials, intellectual property documents such as patent information and trademarks, corporate documents and minutes, information about any outstanding litigation, a list of employees and founders, data about revenue streams, information about business models and projection, and cap tables.

At Deal Box, we help broker-dealers and other syndication platforms streamline their operations by outsourcing all of their firm’s due diligence. Contact us now for a free consultation.