
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Author: Dan Brecher
Date: July 10, 2015
Counsel
212-286-0747 dbrecher@sh-law.comHowever, entrepreneurs should always take the time to get to know their potential investors when it comes to start-up financing. After all, you will likely be married to them for several years. So while investors are checking you out, it is important that you do the same!
When conducting due diligence for start-up financing, there are a number of issues to consider. Most importantly, are these the type of people you want to work with? If your personalities do not mesh well or the investors do not support your vision, your company will likely face a bumpy road. For example, getting their cooperation in documenting future corporate financing issuance approvals or employee and director stock option plans could prove difficult. Furthermore, changes in corporate structure or new preferred stock authorizations brought about by new opportunities or new IRS or SEC guidance may not be appealing to you.
When looking for start-up financing another thought to consider: do the investors bring value to your company? This is where their track record and business experiences come into play. Before accepting their securities purchase agreements and payment, you should feel confident that your investors can deliver if they have displayed that they can bring additional resources, expertise or contacts to the table.
Below are a few tips for conducting your due diligence:
Remember, you will likely be in a long-term relationship with these investors, with few options for a “divorce.” You need to know you will be able to work together for better or worse.
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