Strong marriages often begin with a period of courtship, when two potential partners discover their good and bad habits, become comfortable with each other’s plans for the future, and of course meet the relatives.
In a marriage of business partners, ‘courtship’ is replaced with ‘due diligence’, an unfortunate phrase that certainly doesn’t have the same excitement attached to it. Fairly or not, due diligence has a reputation for being time-consuming, nosy, and unpredictable.
But due diligence can be more than ascertaining financials and legal standing. It can be a process that ultimately creates value for a company. Then it becomes a bit more exciting.
How can entrepreneurs use the due diligence process to discover more about their company while also forging a strong relationship with a potential investor?
If you and your investor are truly well-matched, you might find that the due diligence process generates business opportunities that might not have been discovered otherwise.
For example, we recently made an investment in an exciting company that has built a financial services platform linking wealth advisors, their clients, custodians, and underwriters.
Through the due diligence process, one of our portfolio company CEOs was able to help the newer company plan for inevitable scalability issues. Another portfolio company that works with wealth advisory partnerships introduced the new company’s offering to a few potential customers. When several wealth advisory partnerships wanted to sign on immediately, we knew we had a winner—and the new company’s CEO felt the same way.
In this model of due diligence, strengths can be extended and weaknesses remedied. Together a company and its investors can avoid surprises and make plans for a happy, long-term marriage.