What due diligence should I conduct when reviewing a Startup?
Fundify enables you to see Startups through the eyes of Experts by including Startups that have been reviewed by an Expert in their industry or our internal team. While this can streamline your own individual due diligence, you should always conduct your own review to determine if this is a good investment for you.
Carefully review the Startup’s campaign page and the documents shared there. As a general example you may want to review and consider the factors commonly referred to as the 5 T’s:
Team: Top-notch teams with a track record or prior Startup success may give companies a real advantage. Look to see what kind of experience key players have in their field and in starting companies. Do they have the necessary skill sets to deliver their products or services? Do they understand their market and customers? Are key players part or full-time employees? Have they been able to recruit and hire experienced team members with relevant backgrounds and similar track records of success?
Technology (“Tech”): How might a Startup be incorporating or leveraging technology in order to provide new levels of efficiency, effectiveness and competitive advantage? Is their concept, product or service unique or can it be easily copied? Do they have a roadmap that suggests a path to continual technical and competitive advantages and unique value?
TAM: Consider the size of the available market(s) -- Total Addressable Market (TAM) -- where the Startup competes. How big is the market opportunity? Is it growing? Is it global? How mature is the market? Do you see the market need and believe in their approach to solve it? Might you be a customer?
Timeline: Does the Startup have a milestone timeline and targets? If yes, where are they on that timeline and do the targets seem achievable in your view? Will products or services be ready for the market before other potential competitors? Can you determine if the Startup is in a position to meet a market need at the right time?
Traction: Does the Startup have any existing sales revenue yet? Are they growing? If the company does not yet have any sales (e.g., “pre-revenue”), you might consider the number of followers on Fundify or followings and fans as evidenced by social media stats, email subscribers or other interactions you can locate with potential and prospective customers. What is the Startup’s marketing and growth strategy? Who is the current or potential competition and how is the Startup at least 10 times better than what is otherwise available or coming soon?
If you are satisfied with your own independent research and can give a “thumbs up” to the 5 T’s listed above, considering exploring one more:
Terms: Review the Funding Campaign Investment Terms listed on the crowdfunding (“offering”) page, including the company’s funding goal (which will include a minimum/maximum total), valuation cap (if applicable), discount (if applicable) on equity shares during a trigger event , minimum/maximum investment accepted and deadline (closing date for the campaign).
If at some point you have doubts as a result of your independent review of these and other items related to a crowdfunding campaign, it may not be a wise choice to invest, at least until you have satisfied any concerns or conditions you may have. Invest carefully and remember that investing in Startups is risky, and that most will fail. More on Startup investment risks here.