Antony Brydon wrote a nice piece yesterday about how they maintained an up-to-date folder of all the documents lawyers would need when doing due diligence during a financing round or acquisition when he was working at Visible Path. In the post he includes a checklist of documents lawyers look for when they do their diligence and makes the point that, “The diligence that they do is less about checking every single document and more about getting an overall confidence level that the company is competently handling it’s legal, financial and governance issues.”
The Due Diligence Is No Mystery article on about.com quotes a PE guy saying, “Our goal [with the diligence process] is to feel 100% confident that the team is capable of building exceptional products-now and in the future.” To do this they do personal interviews and spend time evaluating process:
I wish we could just reverse engineer the diligence process to ramp up the startup factory. Maybe we can make our teams more palatable to potential investors & partners by encouraging them to maintain documents. But while I’d like a reputation in the investor community for producing well formed companies, I don’t want a reputation in the entrepreneurial community for forcing beauracracy