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Due Diligence

RVI Members each make their own investment decisions. Therefore, each investor must take whatever steps they personally feel are needed to feel confident in making a high risk investment. That being said, our group tends to closely follow the industry best practices outlined below.

Preliminary Due Diligence

Objective - Complete just enough high-level due diligence to decide if a deal should present to the full Membership. This is not an exhaustive evaluation process, but more a “peeling back the first layer of the onion.”

Typical Process:
  • Customer Calls - Place calls to 2-4 customers to get their initial impression of the company, its solution, and its team.
  • Investor/Strategic Partner Calls - Call 1-2 investors/partner and find out what they feel about the company’s: strengths, weaknesses, team, reasons to invest/partner.
  • Review Business Plan and Financials - Review the company’s full business plan with an emphasis on the financials (including balance sheet), speaking with the entrepreneurs as needed to gain clarification.
  • Quick Reference Checks - Using references provided by the entrepreneurs and one’s own network, place calls to get a quick verification of the quality of the management team.
  • Inform - The Lead Investigator will write up a short list of bullet points: pros, cons, as well as recommendation for future action (such as: decline, invite to present, request Member X joins due diligence). These findings will be summarized at the next due diligence conference call.

Critical Point Due Diligence

Objective - Determine if a deal is interesting enough to warrant a full, deep due diligence effort by finding answers to the most critical questions surrounding the company.

Typical Process:
  • Draft Questions - Write up the 5-10 “critical questions” surrounding the deal and send them to the entrepreneurs.
  • Review Answers - The team reviews the written answers sent by the entrepreneurs and send any clarifying questions as needed.
  • Site Visit - The due diligence team will visit the company's facilities and engage in an extended Q&A session using the written questions and answers as a starting point.
  • Inform - The lead Investigator will write up a short list of bullet points: pros, cons, as well as recommendation for future action (such as: decline, continue critical point due diligence, or proceed to deep due diligence). These findings will be summarized at the next due diligence conference call.

Deep Due Diligence

Objective - Answer all questions to the full extent Members feel are relevant before proceeding with Investment.

Typical Process:
  • Determine Questions and Answers - Using the RVI Deep Due Diligence Template as a starting point the due diligence team will draft begin an iterative process of sending questions and reviewing answers until all important areas are covered.
  • Determine Path - Decide what steps need to be taken to find answers and by whom.
  • Review - Discuss what answers were found and if there is interest in negotiating a term sheet.
  • Report - Before the next RVI meeting the lead investigator will write a report based on the RVI Deep Due Diligence Template and verbally summarize the findings at the next Members’ meeting.