The document discusses the process of angel investment funding and due diligence. It begins by outlining the typical stages of the funding process from initial screening to exit. It then focuses on the due diligence stage, listing common components that are evaluated like management team, market opportunity, and financials. The goal of due diligence is to properly assess risk and identify strategies to support the investment. Differences between how individual angels and groups approach due diligence are noted. Stories of successes, failures, and lessons learned from the due diligence process are shared. Tips are provided around preparation, transparency, leadership, and avoidance of common pitfalls.

1. Jessica McLear
Launchpad VG
MassChallenge
@jessmclear
@LaunchpadVG
Eric Evans
Mass Medical
Angels (MA2)
Ben Littauer Walnut
Venture Associates
Boston Harbor Angels
@littweb
Lynne Riquelme
Shoobx
@LynneRiquelme
@ShoobxInc
Angel Funding Part 2 – Due Diligence: People, Processes and Promises
thecapitalnetwork.org - @TCNUpdate

2. 1. Prescreening &
Screening
Referral is the key to
entering the process
2. Pitching
10-20 min
presentations +
Q&A
4. Syndication &
Funding
With other local groups
or individual Angels/VCs
5. Term Sheet
Negotiation & Deal
Completion
This is setting a market
price NOT a valuation
6. Support & Monitor
the Investment
e.g. Corporate &
Advisory Boards
What’s the process?
3. Due Diligence
Varies between
groups & deal
leads
7. Exit
e.g. IPO, M&A,
Dividends/Royalties or
Shutdown

3. Components of Due Diligence
● Management Team
● Market Opportunity
● Market Entry Strategy
● Customers/Prospects
● Intellectual Property
● Competition and Barriers to Entry
● Technology Assessment
● Business Model Assessment
● Financial Analysis
● Potential Exits

4. The point of due diligence is to:
● Give the deal an appropriate (due) level of scrutiny so that the group
as a whole can make intelligent investment decisions. As a part of the
process, it develops an interested cadre of potential investors.
● Form the team with industry knowledgeable members
● Assess the company so less involved members and syndication
members can decide
● Some groups start with a two hour “Deep Dive” which is either an
on-ramp into an exhaustive process, or results in a no-go decision
Why Do Due Diligence?

5. ● Align the investment goals and funds used with the highest
risk aspects of that company
● Identify most achievable funding strategy
● Set up metrics to use to watch the company progress
● Identify what type of human capital can be used and when to
help the company
● CEO & Deal Lead plan to be able to answer questions and
advocate for the company with potential syndication partners
Goal: Funders, CEO and Team Agree

6. Group Differences
What are the differences in Due Diligence
procedures between groups ?
Individual Angels

7. Stories from the Vault
When we said YES
When we said NO
When Due Diligence Wasn’t Diligent Enough...

8. DO set up, organize and populate a data room, e.g., in Dropbox.
Your prospective investors will be asking for your pitch deck,
team resumes, copies of patents and patent apps, customer,
competitor and market info, financial projections, and other
supporting materials. Developing, archiving and updating this information
will help you stay on track.
DO give a great deal of thought to the biggest risks facing your
company and how you are going to mitigate them. Early stage
investors are comfortable with risk, but they want to see that you understand
them and have plans to address and reduce them
DO listen to and respond professionally and honestly to
skepticism and criticism. Assess the validity of the input you receive and
revise your plans accordingly.
DO project confidence and leadership. Some parts of the
diligence process can be ad hoc and some meetings may be
challenging. Investors will be impressed by your ability to manage the
process.
DON'T put all your eggs in one basket. Use your network to
help identify prospective investors who are a good fit, and
reach out to as many as possible.
DON'T be defensive, dismissive, arrogant, or dishonest, ever,
under any circumstances.
DON'T run your company based on wishful thinking. Assume
things are not going to go as planned, and assume you are
going to need more money than you think.
DON'T wait until you are almost out of money to raise funds.
Dos & Don’ts