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When a prospective company progresses to Due Diligence, the investment will be contingent on the results of a review of your business (a “due diligence review”), and your company and our angels coming to an agreement concerning the terms and conditions of the investment. You may have been through a due diligence review with other investors and our process will probably be similar to theirs in many ways. However, we have found it helpful if we set forth our due diligence procedure to make sure you understand what will be happening, what you can expect, and what is expected of you.
Our due diligence process primarily involves information gathering through document reviews, management meetings, conversations with key customers and suppliers, and standard background checks on key management individuals. We utilize a team of our member angels to conduct the due diligence review and may use MBA students to assist. Each team will have a leader who will be your primary contact.
DOCUMENTS
Typically, you will receive a list of the documents we would like you to provide in electronic format. We will post these documents on a secure website for review by the BlueTree due diligence team. We have found that many of the documents we request will be readily available, and a few may not be relevant for your company. Others will have to be prepared by you. We will also want to review the due diligence reports of other investors. We will review the documents as you provide them. However, we will not proceed to management meetings and the other steps of the due diligence process until you have posted all the requested documents or have explained why a requested document is not relevant. In other words, your ability to provide requested documents in a prompt manner will help us move the due diligence along quickly. Note also, that if BlueTree Allied Angels elects to invest in your company, you will have to represent and warrant the accuracy of many of the documents and information you have provided to us.
MANAGEMENT MEETINGS
Once we have had an opportunity to review the requested documents, we would like to meet with you and your management team to discuss the information you have provided, answer questions that we have developed during the document review, discuss your business plan and financial forecast, discuss cash burn, use of proceeds, etc. These meetings usually last 1-2 hours, and we usually need 3 or 4 meetings. At some point during these meetings, we will ask for references we can contact. These references are usually key customers or suppliers and may include former employers of your key managers.
EXPENSES
Occasionally, during a due diligence process we need to retain outside attorneys or accountants to help us with the due diligence process. For instance, we may need to retain an intellectual property attorney to review a key patent or license agreement. If we need to incur third party expenses, you will be requested to pay for the estimated fees before we move ahead with the engagement. We will not engage a third party professional without your prior approval, and you will only be asked to reimburse us for costs actually incurred.
Typically we pay our own travel and other similar expenses incurred during a due diligence process. If we need to incur an out-of-the-ordinary expense we will seek an advance from you. Again, we will not incur any expense for which we seek reimbursement without your prior approval.
BLUETREE DUE DILIGENCE REPORT
At the end of the due diligence process, we will prepare a due diligence report for use by our members. This report is confidential but may be shared with other angel groups who may be interested in investing in your company if certain conditions are met. Once our members have had an opportunity to review the report, we will canvass their interest in investing in your company, assuming we can reach agreement on a term sheet.
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