What is the key focus in due diligence for an early stage (startup) company?
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There is insufficient financial history for an early stage company which is usually running at loss and waiting for a newly developed product being tested in the market.
perhaps on the prospects of the company’s products and/or services. However, it would be risky for the buyer, who has to invest upfront without any information of the financial status and position of the seller.
Depending on how early a stage a company is at, there is typically no product, business pipeline nor track record, and in many cases the company may not even be profitable yet. Due diligence tends to focus on the technical aspects of product ideation and development plan. Other aspects that may be worth investigating at early stage include HR (particularly the founders and ESOP), intellectual property, corporate status and legal claims.
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