Since venture capital is a complex business, we’ve made it part of our mission to educate entrepreneurs and assist them in their journey to success. Our From The Trenches series answers your questions about VC, and we hope you find them useful. Have a question for our VCs? Send them to us!
Q: How long does the due diligence process take?
A: The diligence process can vary significantly and is highly dependent on a number of factors, such as the stage of the company (seed, early, growth), the volume of information available and the workload of the company and the VC firm. Our diligence process usually progresses through three stages:
2) Information Gathering and Fact Finding
3) Reference Calls
Each stage of diligence signals our interest to the prospective company and also offers several points where we can come to a yes/no decision.
Diligence usually begins with a conversation with the founders and a review of the initial pitch deck. If we are interested in learning more, OIF analysts or partners will reach out for additional information. Once we receive the additional information, it can take anywhere from a few weeks to a month to review. This review is done in conjunction with a few calls and/or onsite meetings with the management team to discuss questions as they arise. When we have a better grasp of the business, the financial model and the team, we make a decision as to whether or not we want to pursue customer reference calls and management team references. In all cases, we attempt to perform our diligence in a way that is as unobtrusive to your day-to-day business as possible and limits the amount of time you have to dedicate to the process.
There are a few things you should try to understand before you enter diligence with a venture fund. It is always good to ask who will lead the process, what their timeline looks like, what their process entails and what are the best ways to communicate throughout the experience. It is also important that the entrepreneur shares their timeline for raising funds so that a firm can prioritize diligence if necessary. This information will help the entrepreneur and VC establish some reasonable expectations around the process and timeline.
—Jill Raderstorf, Partner at the Ohio Innovation Fund