Due Diligence Phase II and Internal Approvals

If venture capitalists are successful in negotiating the basic parameters of the transaction and the investment committee is enthusiastic toward the deal, the next step in the investment process is the involvement of external advisors. This is an expensive but necessary process during which the activities of venture capitalists are limited to providing appropriate briefs to external consultants in order to facilitate smooth communication between consultants and the potential investee firm. External advisors are involved in the investment process for between four and six weeks and their involvement normally ceases upon the submission of their final report to the venture capital firm. This report creates the basis for further interaction between venture capitalists, the investment committee, and the business founders.