Due Diligence

Term from Venture Capital industry explained for recruiters

Due Diligence is the careful research and investigation process that investors perform before making an investment decision. It's like doing thorough homework about a company to make sure everything checks out. This process involves looking at a company's finances, checking their business plans, understanding their market position, and evaluating their team. Think of it as a deep background check that helps investors avoid risky investments and make informed decisions. In venture capital, this is a critical step before any money changes hands.

Examples in Resumes

Led Due Diligence processes for 12 potential startup investments worth $50M

Conducted financial Due Diligence on Series A investments in tech startups

Managed cross-functional Due Diligence teams for venture capital transactions

Performed technical Due-Diligence assessments of startup products

Typical job title: "Due Diligence Analysts"

Also try searching for:

Investment Analyst VC Analyst Due Diligence Specialist Investment Associate Deal Analyst Venture Capital Associate

Where to Find Due Diligence Analysts

Industry Resources

Events & Conferences

Example Interview Questions

Senior Level Questions

Q: How would you structure a due diligence process for a Series B investment?

Expected Answer: Should explain their systematic approach to evaluating companies, including financial analysis, market assessment, competitive analysis, team evaluation, and technical review. Should mention coordinating with different specialists and creating comprehensive reports.

Q: Tell me about a time when your due diligence process uncovered a major red flag. How did you handle it?

Expected Answer: Should demonstrate experience in identifying serious issues, communicating findings to stakeholders, and making recommendations based on discovered risks.

Mid Level Questions

Q: What key financial metrics do you focus on when conducting due diligence for an early-stage startup?

Expected Answer: Should discuss burn rate, runway, unit economics, growth rates, and market size. Should show understanding of why traditional metrics might not apply to early-stage companies.

Q: How do you verify customer references during due diligence?

Expected Answer: Should explain their approach to conducting customer interviews, what questions they ask, and how they validate customer feedback and claims made by the company.

Junior Level Questions

Q: What are the main areas covered in a basic due diligence checklist?

Expected Answer: Should mention key areas like financial statements, legal documents, market analysis, team background checks, and product assessment.

Q: How do you organize and maintain due diligence documents?

Expected Answer: Should demonstrate knowledge of document management, data room organization, and maintaining confidentiality of sensitive information.

Experience Level Indicators

Junior (0-2 years)

  • Basic financial analysis
  • Document organization
  • Research and data gathering
  • Report writing
  • Basic market research

Mid (2-5 years)

  • Financial modeling
  • Industry analysis
  • Customer reference checks
  • Competition analysis
  • Deal flow management

Senior (5+ years)

  • Advanced valuation methods
  • Deal negotiation
  • Risk assessment
  • Team leadership
  • Investment strategy development

Red Flags to Watch For

  • No understanding of basic financial terms and concepts
  • Lack of attention to detail in analysis
  • Poor communication skills
  • No experience with investment research tools
  • Unable to maintain confidentiality