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Investing in start ups

A Due Diligence Perspective

Investing in start-ups is increasingly more relevant (and prevalent) as these companies, when successful, often cause disruption and are at the forefront of innovation.

Our Mergers and Acquisition specialists have outlined the key considerations to take into account when undertaking a due diligence process as a start-up. Traditionally, investors would much rather allocate capital to established businesses with a solid track record and growth trajectory. Now, due to the fast-paced changes in the market, investors are more open to investing in start-ups, despite the increased risk attached.

Notwithstanding the increase in start-up transactions, the risk of failure is still a reality and it is therefore important for investors to perform due diligence prior to investment.

A traditional financial and tax due diligence may not be adequate considering the lack of historical trading data and significant changes in the numbers year on year. A more tailored approach should be taken focusing on validating the key valuation drivers and understanding the key risk areas in the business.

 

Contact Deloitte for an end-to-end deal solution.

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