Doing the due diligence for a Germany-based Series A tech startup

Task

Every transaction needs due diligence, but this is particularly relevant for venture capital firms that want to invest substantial amounts of capital in startups with undeveloped operations. As these studies require a vast amount of time and expertise, we have received a request from venture capital firm, 3TS Capital, in the DACH region to assess the financials of possible investments, as well as tax issues.

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Objective

Finding every risk that may jeopardize the investment or need to be taken into account when setting a price was the goal. In addition, our objective was to highlight areas for improvement that may be input or conditions in the SPA and input for the startup to run effectively.

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Solution

We began our usual due diligence procedure after generating pro-forma consolidated statements from the US and German-based entities. In addition, we have examined the cash flow and its determinants in greater detail, as well as the business and financial models in a more comprehensive manner. In addition to full-scope financial due diligence, and necessary adjustments, our partners have generated regional tax due diligence reports. We have also developed an operating and financial evaluation list that identifies areas of need, potential improvements, and gaps that the startup should work on for operational and cost efficiency, and to comply with national regulations.