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Due diligence for unlisted investments

Chapter IV · Valuation and analysis6 min read

What due diligence means, what areas to review, and how to avoid common mistakes.

What is due diligence?

Due diligence is the thorough review you perform before an investment. It's about verifying facts, understanding risks, and ensuring you make an informed decision.

Key areas

  • Financial DD — Review revenue, costs, cash flow, and balance sheet.
  • Legal DD — Check corporate charter, agreements, disputes, and intellectual property.
  • Commercial DD — Analyze market, competitors, and growth potential.
  • Team DD — Assess founders, management, and key employees.
  • Technical DD — Evaluate product, tech stack, and scalability.

Common mistakes

  • Relying too much on marketing materials.
  • Missing right of first refusal clauses in the charter.
  • Not understanding the cap table and shareholders.
  • Ignoring the competitive landscape.

Summary

Due diligence takes time but protects you from bad investments. Never compromise on thoroughness, especially in unlisted companies where information is limited.

FAQs

For a private investor: 1-4 weeks. Professional investors may spend months. The most important thing is not to rush.

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