The due diligence period is a critical phase in the investment process, giving investors the chance to take a deep dive into a startup’s operations, strategy, finances, and overall potential. 

During this time, investors verify the information presented by a startup, ensuring that they fully understand the risks and opportunities before finalizing their investment and signing a check.

Understanding the Scope

If you are seeking funding, or looking for a sweat equity investment, here is what you can expect investors to be looking at during the due diligence process:

• Financials: Review of past financial statements and future projections. This helps verify the startup’s financial health and the realism of its forecasts.
• Legal: Examination of legal standings, including patents, intellectual property rights, employment contracts, and compliance with relevant laws.
• Market: Analysis of the startup’s market size, competition, growth potential, and position within the industry.
• Technology: Assessment of the technological foundation of the product or service, ensuring it’s both sound and scalable.
• Team: Evaluation of the startup’s leadership and team capabilities, ensuring they have the skills and experience to execute their business plan.

How Due Diligence Works

During the due diligence process, both founders and investors play distinct roles in gathering and providing information.

Founders are typically responsible for organizing and preparing key documents for investors to review. This includes financial statements, business plans, market research reports, legal agreements (such as IP rights and contracts), and operational documents. They are also responsible for facilitating access to the company’s premises, key personnel, and any other resources that investors may need to conduct their due diligence effectively.

Investors’ responsibilities include reviewing the documents and information provided by startup founders and conducting independent verification of the information. This involves engaging in additional research, background checks, or consulting external experts to validate claims made by the founders.

With this information, investors will assess the risks associated with the investment—considering factors such as market competition, technological feasibility, legal compliance, and financial stability—then negotiate terms and conditions of the investment—including valuation, equity stake, governance rights, and any specific provisions to mitigate identified risks. Ultimately, investors use their findings from due diligence to make an informed decision about whether to proceed with the investment, negotiate further, or decline the opportunity.

Effective collaboration and transparency between founders and investors are crucial for a successful due diligence process and building a strong investor-founder relationship.

What To Expect as a Founder

• Be Prepared: Before entering due diligence, ensure all your documents and data rooms are organized. This includes financial records, business plans, market research, legal documents, and more. Being well-prepared can significantly speed up the process—but still expect the due diligence process to last a few weeks or even a few months.
• Transparency is Key: Always be honest about the challenges and risks your business faces. Investors would prefer that you be upfront with them rather than surprise them after they’ve committed their funds. Being transparent can build trust and lead to a better partnership.
• In-depth Questioning: Be ready to answer detailed questions about every aspect of your business. This might include discussions about your revenue model, customer acquisition strategies, cost structures, and long-term vision.
• It’s a Two-way Street: Just as investors are evaluating you, use this period to assess them. Are they the right partners for your business? Do they bring more than just money to the table, such as strategic advice, industry connections, or operational expertise?
• Follow-Up Promptly: Quick responses to requests for information can help maintain momentum and show your commitment to the process.

The due diligence period is more than just a hurdle to secure funding; it’s an opportunity to refine your business strategy and align with partners who can help propel your growth. Founders should approach it with the seriousness it deserves, putting their best foot forward and ensuring they present their startup accurately and completely.

Tampa Bay, FL – June 11, 2024 –  Zenzio AI, a pioneering artificial intelligence sales associate for the automotive industry, secures an investment partnership with RevRoad venture services firm. 

Zenzio AI’s flagship product, AISA™ (AI Sales Associate) is designed to increase efficiency within the automotive sales process by leveraging AI to mitigate friction in the purchasing process for buyers while providing sellers with deeper customer insights. 

In the current digital landscape, 70% of sales leads start online. However, dealerships often lack the tools needed to convert prospects into store visits and close purchases. Zenzio AI’s Omni-Channel AI Sales Associate exceeds human results in communication, boosting dealership revenue and optimizing sales processes.

Founder and CTO Andrew Grubbs expressed his enthusiasm for RevRoad’s unique approach to venture capital and investment. “We started this journey looking for funding, but after talking with RevRoad’s investment team, we quickly saw the value of gaining actual services and valued the way they manage their investments. They don’t just throw money at a problem and hope for the best; they offer real partnerships and tangible services. It’s a breath of fresh air.”

Amy Caldwell, RevRoad Co-founder and Chief Investment Officer, commented, “We are always looking for companies that innovate in big markets. The founding team at Zenzio AI has impressive experience in the industry and the expertise to take this product to market. Along with our service teams, AISA will become the top-performing sales associate in the automotive industry.”

Zenzio AI’s founding team leverages decades of experience in automotive sales, technology and AI development, and technology law. With the support of RevRoad, Zenzio AI is focused on several key objectives: iteratively validating and building both inbound and outbound AI sales tools, increasing the customer base, and boosting revenue.

For more information, visit zenzio.com and revroad.com.

About Zenzio AI

Zenzio AI bridges the divide between online lead gen and in-store purchases by streamlining digital conversations on the dealer’s site. Our AI Sales Associate (AISA™) handles most sales activities better than an experienced salesperson, including answering queries and checking inventory—all 24/7. With the help of AI, dealerships can take the pressure off of car buying and fill their sales team’s pipeline with more quality leads. 

About RevRoad
RevRoad is a sweat equity partner, dedicated to scaling and achieving the full value of startups. The company empowers portfolio companies to maximize profitability, get to market faster, and create a solid foundation for their venture. RevRoad team members work shoulder-to-shoulder with portfolio companies, enabling businesses to scale efficiently while keeping founders in the driver’s seat. 

Meet Jenny Groberg, Founder of BookSmarts Accounting and Bookkeeping, who took center stage as the Featured Founder at June’s RevRoad University. Here are three lessons we learned from Groberg at the event:

1. Delegation is Key to Growth

“If you’re not delegating constantly, you won’t grow,” Groberg shared.

Early in her journey, Groberg realized that she couldn’t do everything herself. By hiring her first employee, she was able to focus on expanding the business rather than getting bogged down in the details. Groberg’s approach to delegation allowed her to scale her business without burning out.

Later, after suffering a traumatic brain injury, Groberg was forced to step back from her business.

“My capacity was 2%. I couldn’t go to Target to help my kids get school supplies. I couldn’t open my email,” Groberg recalled.

Despite the severity of her injury, she chose not to sell her business. Instead, she delegated leadership to her trusted colleague, Emily, who helped the company grow by 400% during Groberg’s recovery.

Even after her remarkable recovery, Groberg continues to practice what she preaches. She delegates tasks that others can handle, including managing her own company’s accounting, despite being an accountant herself.

“I don’t [do the accounting] for my company because I can make more money if I am working on building my business.”

Groberg proves that delegation is a vital tool for growth; not only has she built a thriving business, but she has also ensured its continued success by empowering her team to take on more (and more important) tasks.

2. Empower Your Team by Prioritizing People Over Profits

Groberg has always told her staff, “You are the asset. My job is to protect the asset. You guys come first regardless of what happens with our clients.”

Recently, she had to stand by these words when faced with a difficult decision. A high-revenue client, who had been bringing in nearly $200,000 annually, repeatedly disrespected one of her staff members—ignoring emails, undermining their expertise, and shifting blame unfairly.

After nine months of this, Groberg and her VP concluded that it was time to let the client go, despite the financial impact.

“It was really impacting everybody negatively by maintaining that relationship. And it’s not worth it. There’s plenty of business, and money is not the priority,” Groberg reflected.

This decision, though financially difficult, reinforced her commitment to her employees’ well-being. For Groberg, the long-term success of her business depends on a happy, motivated team.

“I will admit it was tough to let the client go,” Groberg admitted. “But it was a really good move. It’s one thing to say, ‘We value you more than the money.’ But when it comes time to put your money where your mouth is and do it, it’s hard.”

Shortly after, the decision proved wise, as they quickly secured another client to replace the lost revenue.

3. Building a Culture of Empowerment for Women

When Groberg first started building her business, she had to build a name for herself in the male-dominated field of accounting. Her unique approach and commitment to her clients quickly set her apart.

“I had this one guy call me and he said, ‘I would much rather work with you than a 50-year-old fat guy,’” Groberg recalled.

Leveraging these early successes, she proactively gathered client reviews, often handing over her laptop to clients for them to write a review before she even left the appointment, helping her gain traction in a competitive industry.

Motivated by her personal experiences, Groberg has made it her mission to empower other women—especially mothers—who are navigating similar challenges in raising children and providing for their families. Groberg has built a company that offers flexible, remote opportunities that allow women to thrive both professionally and personally. Today, her company employs over 30 women, many of whom work from home, giving them the flexibility to manage their careers while also raising their families.

“By allowing these women to be able to work from home and contribute financially, but also be with their kids, it’s pretty incredible,” Groberg shared.

Groberg takes immense pride in seeing her team succeed, both at work and at home; seeing these women manage both their professional responsibilities and their roles as mothers is one of the most rewarding aspects of her business.

Watch the full interview on YouTube here.

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RevRoad University is a monthly lunch-and-learn event for entrepreneurs, featuring a Featured Founder who shares their journey to success, including the highs, lows, and valuable lessons learned along the way. Join us online at youtube.com/revroad or in person at 412 W River’s Edge Dr., Provo, UT 84604 (RevRoad HQ).