How to create a due diligence roadmap for Series B investors

Welcome to TechCrunch+ Tuesday

Last week, we ran an article by Gaetano Crupi, a partner at VC firm Prime Movers Lab, identifying three pillars required to support a Series B data room: a strategy memo, a pitch deck, and a forecast model.

In a follow-up, he explains the next step: packaging this information for prospective investors to “create the blueprint and backbone for an in-depth Series B due diligence process.”

If you’re preparing for a Series B, these articles explain exactly what investors are looking for and how each piece of content works individually and in tandem.

Crupi also discusses less obvious aspects of Series B fundraising, such as the need for topic-specific breakout decks, a comprehensive due diligence questionnaire, and critically, how to put it all together.

If your startup still hasn’t achieved product-market fit, feel free to skip this article and get back to work. As Crupi notes:

The advice presented here will only help companies that have really good fundamentals. You have to have the goods — all the other stuff is window dressing that tips luck in your favor.

Thanks very much for reading,

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

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‘Just break even’ may be the worst possible advice for startups in turbulent times

A friend shared a photo on Twitter of a feral cat in NYC walking on the electrified third rail of a subway track.

It was dangerous, but as long as the animal avoided making contact with the ground and the rail simultaneously, it could very well have been the safest route to its destination.

Refusing to cut costs during a downturn is similar to walking on the third rail: companies that can maintain this tricky balance can maintain growth that propels them to the next level, according to Igor Ryabenkiy, CEO and managing partner of AltaIR Capital.

“Founders tend to like the idea of breaking even as quickly as possible,” he writes.

“Although their company might not become a unicorn, it can now earn them a stable salary and dividends. But for an investor, this is terrible.”

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4 employment law mistakes startups can stop making today

There’s no nice way to say this: when it comes to onboarding new employees, most early stage startups are either inept or uninterested.

At that point in a company’s development, Speed and Growth are considered more important than basic paperwork. And since most first-time founders have no management experience, problems will eventually arise.

In her third article for TC+, attorney Kristen Corpion explores the risks associated with non-compliance, and describes four common mistakes that create problems down the road.

“By being proactive with addressing employment law issues early on, a startup can set itself up to scale more seamlessly,” she writes.

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YC’s Michael Seibel clarifies some misconceptions about the accelerator

In a conversation adapted from the Equity podcast, Michael Seibel, partner at YC and managing director of YC Early Stage, spoke about starting up during a downturn, why his accelerator is offering larger checks, diversity, and other issues relevant to seed-stage startups.

In the middle of last year, we started asking the question, ‘What’s the revenue multiple here?’ And we started seeing companies raising at 100x to 350x their revenue.

So if I have $3 million in revenue, I have a billion-dollar company. Any of us who’ve been around for longer than two seconds [knows] that doesn’t feel sustainable.

So our partners, Dalton Caldwell, Jared [Friedman] and I sat down that fall and we were like, ‘Let’s say that this doesn’t continue,’ because that seems to be for sure. ‘What can we do to help YC companies in a downturn?’

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