The first book to offer a comprehensive framework for conducting the venture capital due diligence process Venture capitalists and other professional investors use due diligence to uncover all of the critical aspects of a company in which they are considering investing in an attempt to estimate the ROI of this decision.

Introduction 1

Chapter 1 Screening Due Diligence 5

Chapter 2 Management Due Diligence 23

Chapter 3 Business Opportunity Due Diligence 65

Chapter 4 Due Diligence on Intangibles 97

Chapter 5 Legal Due Diligence 101

Chapter 6 Financial Due Diligence 199

Epilogue 225

Notes 227

Index 247

Performing Venture Capital Due Diligence the Right Way

Venture Capital Due Diligence provides a clear and complete explanation of the venture capital (VC) due diligence process and shows you how to use it to assess investment opportunities, make smart investment decisions, and increase the return on your overall venture capital portfolio.

This comprehensive guide offers a full explanation of the VC due diligence process, from using screening mechanisms that sort out potential opportunities, to assessing the management qualities, business models, legal issues, and even intangibles of target companies. Structured around a number of carefully crafted questions that venture capitalists often ask when performing due diligence, this book puts you-the reader-in the position of a VC conducting due diligence on a particular company.

In-depth discussions of these questions and their possible answers pull together opinions from many of the major players in today's venture capital industry, including . . .
* Richard Testa of Testa Hurwitz & Thibeault
* Ann Winblad of Hummer Winblad Venture Partners
* John Doerr of Kleiner Perkins Caufield & Byers
* Craig Johnson of the Venture Law Group
* Don Valentine of Sequoia Capital
* Kevin Fong of the Mayfield Fund

. . . and many others who are qualified to comment on the proper methods of performing VC due diligence and making VC investment decisions.

An essential guide for anyone involved in venture capital investing, Venture Capital Due Diligence helps you uncover potential problems, while showing you where to look and what to look for when conducting VC due diligence.

Venture Capital Due Diligence

"The process of making investment decisions encompasses the heart and soul of venture capital."
-Standish H. O'Grady
Senior Managing Director, Granite Ventures

Venture capitalists and other types of venture investors work very hard to uncover every critical aspect of a company that they consider an investment opportunity. This informing process has come to be called "venture capital due diligence."

Venture Capital Due Diligence: A Guide to Making Smart Investment Choices and Increasing Your Portfolio Returns provides you with a clear and complete explanation of the venture capital (VC) due diligence process and shows you how to use this process to properly assess investment opportunities, make smart investment decisions, and increase the return on your overall venture capital portfolio. Straight from the world's most successful venture capitalists, the advice in this book will show you how to assess the quality of a deal by using proven screening mechanisms, and will familiarize you with the methods for gauging the compatibility of a given opportunity with your investment strategy and portfolio. You'll also learn how to perform VC due diligence on other aspects of a company, including management, business model, product, and legal issues, as well as the intangibles of a company, such as focus, momentum, and buzz. Rounding out the process of VC due diligence, this valuable resource shows you how to analyze financial statements-both historical and pro forma-handle ownership issues, and perform the important function of valuation.

Venture Capital Due Diligence is structured around a number of carefully crafted questions that venture capitalists often ask when performing due diligence-questions that are logically organized throughout the book in the way venture capitalists usually address them. Each question puts you-the reader-in the position of a venture capitalist conducting due diligence on a particular company, so that you may gain a thorough understanding of how venture capitalists realistically perform this type of important function.

Discussion of these questions and their possible answers allows you to explore the variety of different avenues available during each step of the VC due diligence process. These discussions pull together the opinions of many of the major players in today's venture capital community, including:
* John Doerr of Kleiner Perkins Caufield & Byers
* Don Valentine of Sequoia Capital
* Kevin Fong of the Mayfield Fund

Venture Capital Due Diligence provides a rigorous VC due diligence framework along with a set of tools, techniques, tip sheets, and checklists that can be customized to fit your personal investment criteria or the practice of your firm. This unique, practical resource clearly outlines the VC due diligence process and shows you how to use it to make informed, accurate, and profitable investment decisions.