Prompt templates for startup due diligence

Here’s a detailed article on Prompt Templates for Startup Due Diligence that you can use for your website, hitting 1500-1800 words roughly:

Prompt Templates for Startup Due Diligence

Conducting due diligence on startups is a critical step for investors, venture capitalists, and corporate partners. This process helps assess the viability, risks, and growth potential of a startup before making investment or partnership decisions. Due diligence covers many facets, including financials, legal compliance, market potential, product viability, team strength, and technology.

To streamline this complex evaluation, well-crafted prompt templates serve as essential tools. These templates ensure thoroughness and consistency while saving time. They guide evaluators to ask the right questions and gather relevant information from startups. Below are comprehensive prompt templates categorized by key areas of startup due diligence.

1. Company Overview and Market Opportunity

• Describe your startup’s mission and vision in detail.

• What problem does your product or service solve?

• Who are your target customers, and what is their size and location?

• What is the total addressable market (TAM) for your product/service?

• How have you validated the market demand so far?

• Who are your main competitors, and what differentiates your startup from them?

• What is your business model and revenue generation strategy?

• Provide an overview of your current traction (customers, partnerships, revenue).

2. Product and Technology Due Diligence

• What is the current stage of your product development (MVP, beta, fully launched)?

• Describe your product’s key features and technological innovation.

• What technology stack is your product built on?

• Are there any patents, copyrights, or proprietary technologies associated with your product?

• How do you manage product development and iteration? Describe your R&D processes.

• What is your product roadmap for the next 12-18 months?

• Have you conducted any user testing or feedback sessions? What were the outcomes?

• What are your plans for scaling technology infrastructure?

3. Financial Due Diligence

• Provide your financial statements for the past 2-3 years (income statement, balance sheet, cash flow).

• What is your current cash burn rate and runway?

• How much capital have you raised to date, and from whom?

• What are your key financial projections for the next 3-5 years?

• What is your gross margin and customer acquisition cost (CAC)?

• Describe your unit economics and lifetime value (LTV) of customers.

• Have you identified any financial risks or liabilities?

• What is your fundraising plan and target valuation for the next round?

4. Legal and Regulatory Compliance

• Provide details of your company’s legal structure and jurisdiction.

• Are there any outstanding legal issues or litigation involving your company?

• Have you secured all necessary licenses and permits to operate?

• Describe your compliance with industry-specific regulations.

• How do you handle data privacy and protection (e.g., GDPR, CCPA)?

• What contracts and agreements are in place with customers, suppliers, and partners?

• Have you performed any IP due diligence, including trademarks and patents?

• What insurance policies do you hold for the business?

5. Team and Organizational Due Diligence

• Provide backgrounds and key achievements of the founding team.

• How is your current team structured, and what are the key roles?

• What is your hiring strategy for the next 12 months?

• Describe your company culture and employee retention rates.

• How do you incentivize your team (stock options, bonuses)?

• Have you identified any key talent gaps or organizational risks?

• Are there any co-founder agreements or key employee contracts?

• How do you handle performance management and professional development?

6. Customer and Sales Due Diligence

• Who are your top customers, and what percentage of revenue do they represent?

• What is your sales process and average sales cycle?

• Provide details of your customer acquisition channels and marketing strategies.

• How do you track and measure customer satisfaction and retention?

• What feedback have you received from customers, and how have you acted on it?

• What is your churn rate, and what steps are you taking to reduce it?

• Are there any major contracts or partnerships that impact sales?

• How do you plan to scale your sales and marketing efforts?

7. Risk Assessment and Mitigation

• What are the top risks facing your startup (market, financial, operational, legal)?

• How do you monitor and manage these risks?

• What contingency plans do you have in place for critical risks?

• Have you experienced any major setbacks or pivots? How did you handle them?

• Describe your cybersecurity measures and data protection policies.

• What external factors (economic, political, regulatory) could impact your business?

• Are there any dependencies on single customers, suppliers, or partners?

• How do you ensure business continuity in case of disruptions?

Using These Prompt Templates Effectively

1. Customize Based on Industry and Stage
   Tailor questions to fit the startup’s industry and maturity. Early-stage startups may have limited financial history but a stronger focus on team and product potential.

2. Combine with Document Requests
   Attach requests for supporting documentation to verify answers, such as financial reports, patents, legal filings, and customer contracts.

3. Conduct Interviews and Follow-Ups
   Use the prompts as guides during live interviews with founders and key team members, allowing for clarification and deeper probing.

4. Evaluate Responses Against Benchmarks
   Compare the startup’s data with industry benchmarks to identify strengths and weaknesses objectively.

5. Use Digital Tools
   Incorporate these prompts into digital due diligence platforms or checklists for systematic tracking and collaboration across the evaluation team.

Conclusion

Prompt templates for startup due diligence are invaluable in managing the complexity of startup evaluation. By covering key areas like market, product, financials, legal, team, and risks, these templates enable thorough, structured, and efficient assessment. For investors and partners, they help mitigate risk and identify startups with the highest potential for success.

If you want, I can generate a downloadable checklist or a formatted questionnaire version of these prompts too! Would that help?