Our Due Diligence Process
Our due diligence team performs a thorough review on each company in order to instill investor confidence and help your company succeed. We view our due diligence process as an advantage and an opportunity for your company to become investor ready.
We collect materials that support your business aspirations and past performance.
Analysis & Inquiry
Tips for Start Ups on Due Diligence
Prepare due diligence binders
Once you’ve decided to raise money from outside investors, take the time to prepare due diligence binders. Assign the coordination of binders to one person who will keep track of information and update documents when appropriate.
Having due diligence binders ready will demonstrate to the potential investor that you are prepared. It will also speed up the review process. Using these business and legal checklists enables you to anticipate most of the information requested. Respond quickly and professionally to any additional investor requests. Remember that they are evaluating the content of your response as well as how you respond to the various requests as part of the assessment.
Consider due diligence your process too.
After an investment, you will experience both good and bad times, and events might not unfold as planned. Make sure that this investor can become a long-term partner.
Assign a point person for communications
Have one person coordinate the responses to the investor. This ensures the consistency of your messaging to the investor.
Answer your investor’s questions thoroughly.
As you answer an investor’s questions, circle back to make sure that you’ve provided a complete response. Take the opportunity to see if the investor is still warm to the deal. It is better to find out early that they are not likely to invest.
Use feedback with other investors.
Take the feedback you receive throughout the process to course correct with other potential investors. It’s likely that one group’s concerns may come up with other investors.
Build trust with your investor.
Getting through the due diligence process is an important step to successfully raising money but also a critical part in the development of a relationship with the investor. During this process, you’ll build trust and establish the groundwork for an ongoing partnership.
Loxley's Due Diligence Process
The Private Capital Industry uses due diligence to describe what the investor does to evaluate a potential investment opportunity. By definition, investing in early-stage companies is risky. The due diligence process should help select the potential winners, identify the key risks associated with the investment and develop a risk mitigation plan with company management as part of a potential investment.
Loxley’s Due diligence is a rigorous process that determines whether or not we will commit to underwriting an investment opportunity. Our process involves asking and answering a series of questions to evaluate the business and legal aspects of the opportunity. Once the process is complete, Loxley will use the outcomes of the process to finalize the internal approval process and complete the underwriting process.
There are four stages of due diligence:
1. Screening due diligence
2. Business due diligence
3. Legal due diligence
4. Investment Review Committee
Stage 1: Screening Due Diligence
Loxley reviews and evaluates hundreds of business opportunities. We use predetermined criteria to identify which opportunities to focus on as possible investments. This allows our Corporate Finance team to quickly flag the ones that fit and indicate that they will spend more time and money evaluating.
Typically, for each 100 opportunities reviewed, ten will receive a detailed review. Most opportunities do not make it through screening process.
Stage 2 : Business Due Diligence
Once the opportunity is determined to “fit” Loxley’s investment criteria, the deal is assigned to a member of our Corporate Finance team who will investigate further to determine the viability of the deal. Loxley has a specific process that involves reviewing the management team, market potential, the product or service (and the need it meets) and the business model. During this stage in the Due Diligence process our Corporate Finance Team collects as much information as possible about your company and performs a thorough analysis and review. This detailed review is a huge benefit to your company as it allows you an opportunity to have an independent third party review your business and provide meaningful feedback. Even if the opportunity isn’t a good fit for Loxley we still provide a detailed report that can help you prepare for other fund raising attempts.
Stage 3 : Legal Due Diligence
Once Loxley has reached the stage of moving toward a favourable decision, our legal team will complete a legal review of the opportunity.