“There are two ways to extend a business. Take inventory of what you’re good at and extend out from your skills. Or determine what your customers need and work backward, even if it requires learning new skills.”
~ Jeff Bezos
Before closing a deal, angel investors (and particularly angel investor groups) will complete what’s known as due diligence, which is a deeper investigation into the details of the business.
The short list of the key elements that may need to be prepared for angel investors for the due diligence phase include the following (not all of these items will be relevant for every company):
- Background of the company
- Background of management
- The company’s business plan
- Financials of the company inception (if applicable)
- Management discussion of company performance (if applicable)
- Capitalization table (list of current equity holders)
- Employment agreements
- Purchase or sale agreements
- Previous letters of intent
Make sure you prepare each of these materials beforehand so you can quickly respond when these items are requested.
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Today’s Question: In 1876 William Orton, president of Western Union Telegraph Company, declined to purchase the patent for which invention, saying it had “no commercial possibilities”?
Previous Question: Pharmaceutical giant Johnson & Johnson issued a nationwide recall of what well-known pain reliever after 7 people died from taking pills which had been tampered with on store shelves?
Although the tampering was believed to have only affected a small number of bottles in just a few stores and did not occur in the factory, Johnson & Johnson immediately halted all advertising and recalled 31 million bottles at a loss of $100 million.
After the product’s market share dropped from 37% to only 7%, Johnson and Johnson reintroduced Tylenol with a patented triple-seal tamper resistant package and offered clients discounts on purchases.
The company recovered from the incident thanks to the immediate action and assumption of responsibility, and has since been featured on Fortune Magazine’s “Most Admired Companies” list and has regained its market share and then some. Lesson: always do the right thing; while in the short-term, it may cost you money, in the long-term you will reap the rewards.
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