Skip to content
Analysis

Essential Due Diligence Checklist for News Leaders

By The Pivot Fund

July 18, 2024

Card with words due diligence and eyeglasses next to it.

Earlier this week, a federal jury convicted Carlos Watson, the co-founder of Ozy.com, for defrauding investors and lenders while promoting his news media startup. His conviction will undoubtedly make it harder for other media founders working to do the right thing. Founders must exercise comprehensive and rigorous due diligence to ensure their business’s integrity, legality, and success. Here are key areas and steps for thorough due diligence:

1. Financial Due Diligence

  • Audited Financial Statements: Obtain and review audited financial statements to ensure accuracy.
  • Cash Flow Analysis: Monitor cash flow projections and ensure they align with actual performance.
  • Debt and Liabilities: Assess all existing debts and liabilities, including any potential future obligations.
  • Revenue Verification: Verify revenue streams and ensure they are sustainable and accurately reported.

2. Legal Due Diligence

  • Compliance: Ensure compliance with all relevant laws and regulations, including corporate, tax, and employment laws.
  • Contracts: Review all contracts with suppliers, customers, and partners for enforceability and potential risks.
  • Intellectual Property: Verify ownership and protection of intellectual property, including patents, trademarks, and copyrights.
  • Litigation: Assess any existing or potential legal disputes or litigation risks.

3. Operational Due Diligence

  • Business Model: Evaluate the sustainability and scalability of the business model.
  • Market Analysis: Conduct a thorough market analysis to understand market size, competition, and potential growth.
  • Supply Chain: Assess the reliability and risks associated with the supply chain.
  • Technology: Ensure that technology and systems used are secure, up-to-date, and efficient.

4. Human Resources Due Diligence

  • Leadership Team: Evaluate the experience and track record of the leadership team.
  • Employee Contracts: Review employment agreements and ensure compliance with labor laws.
  • Company Culture: Assess the company culture and its alignment with business goals and values.

5. Customer and Vendor Due Diligence

  • Customer Base: Analyze the customer base for diversity and stability.
  • Vendor Reliability: Evaluate the reliability and performance of key vendors and partners.

6. Risk Management

  • Insurance Coverage: Ensure adequate insurance coverage for all aspects of the business.
  • Contingency Plans: Develop contingency plans for potential risks, including financial, operational, and reputational risks.
  • Regular Audits: Conduct regular internal and external audits to identify and mitigate risks proactively.

7. Ethical and Social Responsibility

  • Corporate Governance: Establish strong corporate governance practices and a code of ethics.
  • Social Responsibility: Implement and promote socially responsible business practices.
  • Transparency: Maintain transparency with stakeholders, including investors, employees, and customers.

By exercising this level of due diligence, founders can better manage risks, make informed decisions, and build a foundation for sustainable and ethical business growth.