Venture Capital Transactions（三）.pptVIP

Son-U Michael Paik, Attorney-at-Law Technology Transaction Consulting qedasi@ Venture Capital Transactions Due Diligence and Post Closing Matters Columbia Law School February 23rd, 2004 What is Due Diligence? Due Diligence (DD) Originally used in public securities offerings context; it was a legal obligation imposed on parties involved with the creation of prospectuses to use DD to ensure that they contained no material misstatements or omissions, so that the purchasers of the securities would be better able to make informed investment decisions. In the VC context, the securities are issued in a private transaction; it is the investors who must inform themselves regarding the companies they consider for investment. What’s Involved in DD? Due Diligence (DD) involves: Screening DD Management DD Business Opportunity DD DD on Intangibles Legal DD Financial DD Woodside Fund: “the thorough investigation and analysis the investor makes of a prospective investment to see if it meets the investor’s strategy and criteria for funding. It includes an assessment of the industry, market, business concept, management team, the company’s technology, products and markets, and financials.” Targeted Questions for DD Screening DD: quickly getting to core business opportunities Management DD: assessing the quality potential of management Business Opportunity DD: products, models competition DD on Intangibles: focus, momentum, buzz and “gut feelings” Legal DD: uncovering and anticipating problems Financial DD: valuation is derived negotiated through the DD! Screening DD Screening DD Management DD Business Opportunity DD DD on Intangibles Legal DD Financial DD Where did the deal come from? What’s the quality of the biz plan? Who are current potential investors? Who is their lawyer? Accountant? What’s the origin of the company? Who are their partners and customers? Shopped? Who has rejected it why? Are you in this market space? Is the company at the right stage? Does the comp