Below is a fairly comprehensive list of what I look for when I am doing due diligence on a potential startup investment.
Choice of Entity
- C-Corp, LLC etc.
Capitalization
- Cap tables accurate?
- Founders shares vest schedule.
- Filed 83(b) elections
- Equity incentive plan
- Obtained 409A valuation
- Bylaws, charter, shareholder agreements, stock purchase agreements
Intellectual Property
- Confidentiality agreements
- Assignment of invention agreements
- IP registered under company name
- Agreements that would limit business
- Exclusivity clauses, profit sharing, non-compete?
Employment Matters
- Misclassifying employees as contractors
- Any employees subject to non-competes from former employer
- Review hiring forms
Compliance
- Industry specific laws
- Licenses, approvals and/or certifications