Investing in Universities - Webinar Series, Legal and Financial Due Diligence: Looking Under the Hood


On June 8, Winstead hosted a webinar entitled “Legal & Financial Due Diligence: Looking Under the Hood,” its first installment in a series of webinars regarding investing in university startup companies. The presenters were Winstead Shareholder Ryan Valenza and Associate Daniel Bell-Garcia, and guest panelist Director - Business Advisory Services Ali Daubert of Baker Tilly.


  • Overview of the diligence process from start to finish
  • What to expect as a startup, and how to prepare
  • Key areas of focus in venture capital due diligence
  • Financial diligence: what does it entail, and how to survive it


Ryan Valenza, Winstead PC
Daniel Bell-Garcia, Winstead PC
Ali Daubert, Baker Tilly

During the webinar, the presenters discussed a number of key aspects that need to be considered by investors during the due diligence process:

  1. When conducting due diligence, it is important to dive in and understand exactly how a company’s business works, its industry, and the details of its business plan. During this stage, it is imperative to follow the ins and outs of how the day-to-day operations of its business works.
  2. It is also necessary to find out if there is any pending or potential litigation risk. Are there lawsuits on the horizon due to its intellectual property or because of conduct of an employee? An investor might not want to get involved with a company that is facing a potentially damaging lawsuit.
  3. Before making an investment, it is imperative for investors to review internal company records. This means looking at information related to formation and registration, as well as all pertinent ownership information, including past financings and equity structure. It is also important to take a close look at employee records and company insurance policies to understand its equity compensation structure and insurance protection.
  4. Regulatory analysis also plays a key role in the due diligence process. Investors should look at all applicable regulations that may impact a company. They should also look at a company’s permits and licenses, and also identify any potential compliance issues that may be lurking.
  5. Investors should review a company’s debt records, including all types of debt a company may be carrying, including third-party credit facilities and founder and affiliate loans. Onerous debt burdens can lead to revaluations of the target company.
  6. Every company will have contracts, including deals with the vendors or suppliers and customer, which should be reviewed by investors. Investors may be particularly sensitive to contract provisions that limit the target’s business, such as exclusivity provisions, or prohibitive change of control or termination provisions. Understanding a company’s legal obligations is critical before making any kind of investment. At a minimum, a review of the company’s preferred contract templates should be performed.
  7. In addition, the target company’s IP portfolio and protection strategy may be among the highest priority diligence items for potential investors.
  8. When conducting financial due diligence, it is imperative to first understand what the other side is trying to gauge. For instance, during this stage, the company may be looking at what needs to be modified or fixed, as well as understanding what specific value the investor brings to the table.
  9. In addition, the target company’s IP portfolio and protection strategy may be among the highest priority diligence items for potential investors. This includes a lack of records or records that do not agree with one another. It is important to make sure that everything makes sense when it comes to financial history.

View webinar

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