The Ultimate Tech Due Diligence Questionnaire

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

When it comes to making a smart investment decision in technology, due diligence is an essential part of the process. A comprehensive due diligence questionnaire should be used to ensure that all key areas are addressed, and that any potential risks or opportunities with the investment are identified. With this in mind, the Genie AI team has developed ‘the world’s largest open source legal template library’, providing millions of datapoints to teach its AI what a market-standard due diligence questionnaire looks like.

Using Genie AI’s datasets and community template library, investors can draft and customise high quality legal documents without having to pay for a lawyer. This free resource provides invaluable insight into the key questions investors must ask when evaluating a technology investment - questions covering aspects such as the technology itself, the team behind it, the competitive landscape, financials and future growth prospects.

What’s more is that each individual due diligence questionnaire should be tailored specifically to each tech venture - allowing investors to gain insight into whether their chosen technology investment is right for them or not. In this way, investors can make an informed decision based on their detailed assessment of all of the relevant factors surrounding their potential tech investment - helping them make sure it will be successful in achieving its desired outcomes for both parties involved.

So if you’re looking for a comprehensive guide on how best to assess your next tech venture before investing - look no further than our step-by-step guidance here at Genie AI and access our free template library today by clicking here!

Definitions (feel free to skip)

Financial Analysis: A comprehensive evaluation of a company’s financial information, including an analysis of the income statement, balance sheet, and cash flow statement.

Market Analysis: An assessment of the competitive landscape, the size of the potential customer base, and the potential for growth.

Technology Analysis: An examination of the current and future technology stack and scalability, as well as the potential for innovation and development.

Intellectual Property (IP) Analysis: A review of any patents, copyrights, and trademarks associated with a company, as well as an assessment of the risk of infringing on existing IP.

Regulatory Analysis: An evaluation of any applicable regulations and potential liabilities, such as data privacy and security.

Human Resources Analysis: An analysis of the current team and organizational structure, as well as an assessment of employee experience and expertise.

Business Operations Analysis: An examination of the existing business model and associated operations, including production and distribution.

Legal Analysis: An assessment of existing contracts and potential liabilities, such as insurance coverage and dispute resolutions.

Risk Analysis: An evaluation of any financial, operational, and reputational risks associated with an investment.

Exit Strategy: An analysis of any potential divestment options and timeline, as well as the company’s ability to execute the exit strategy.

Contents

• Financial analysis
• Examination of the company’s financial history and projections, including income statement, balance sheet, and cash flow analysis.
• Market analysis
• Understanding the competitive landscape, potential size of the addressable market, and potential customer base.
• Technology analysis
• Examining the current and future technology stack, scalability of the solution, and potential for innovation.
• Intellectual Property (IP) analysis
• Reviewing pertinent IP, including patents, copyrights, and trademarks, and assessing the risk of infringing on existing IP.
• Regulatory analysis
• Assessing any applicable regulations and potential liabilities, including data privacy and security.
• Human resources analysis
• Evaluating the existing team and organizational structure, considering employee experience and expertise.
• Business operations analysis
• Understanding the existing business model and associated operations, including production and distribution.
• Legal analysis
• Examining existing contracts and any potential liabilities, including review of insurance coverage and dispute resolutions.
• Risk analysis
• Identifying and assessing any potential risks associated with the investment, such as financial, operational, and reputational risk.
• Exit strategy
• Establishing expectations for the eventual exit of the investor, including potential divestment options and timeline.

Get started

Financial analysis

• Analyze the company’s financial statements, including income statements, balance sheets, and cash flow statements
• Research the company’s financial history, including past performance and trends
• Compare the company’s financial performance to that of its competitors
• Look for any warning signs or red flags in the financials
• Make sure the company is in compliance with all prevailing laws and regulations
• Check for any potential liabilities or risks
• Make sure the company is on track to meet its goals
• Make sure the company has sufficient cash flow to sustain operations

Once all the items listed above are completed, you can move on to the next step.

Examination of the company’s financial history and projections, including income statement, balance sheet, and cash flow analysis.

• Collect financial statements from the past three years, including income statements, balance sheets, cash flow statements, and other related documents
• Analyze the company’s financial trends and identify any potential red flags
• Compare the company’s financial projections with actual performance
• Calculate various financial ratios, such as the current ratio, quick ratio, debt-to-equity ratio, operating margin, etc.
• Assess the company’s financial health and stability
• Look out for signs of financial distress, such as high debt levels and low cash balances

When you’ve completed the examination of the company’s financial history and projections, you can move on to the next step: Market Analysis.

Market analysis

• Research the company’s current market, including any current competitors, potential customer base, and estimated market size
• Analyze the industry trends and forecasts to understand how the market might evolve in the future
• Examine the company’s positioning in the current market and identify any areas of strength or weakness
• Evaluate the company’s competitive advantages and disadvantages and assess the competitive landscape
• Identify any potential risks associated with the company’s market
• When you have a good understanding of the company’s competitive position in the market, you can check this off your list and move on to the next step.

Understanding the competitive landscape, potential size of the addressable market, and potential customer base.

• Research the company’s potential competitors and assess the strength of their offerings
• Estimate the total size of the potential customer base and the size of the addressable market for the company’s product or service
• Analyze the company’s current customer base and assess the customer lifetime value
• Identify the company’s target customer segments
• Determine whether the company’s customer base is likely to remain loyal to the product or service

You can check this off your list when you have a good understanding of the competitive landscape, the size of the addressable market, and the customer base.

Technology analysis

• Assess the technology stack and its relevance to the current and future needs of the business
• Estimate the scalability of the current and proposed solutions
• Assess the quality of code and the development processes used
• Identify and evaluate any existing technology partners
• Identify any potential risks and opportunities related to the technology
• Identify any potential support, maintenance, and training requirements
• Evaluate the potential for innovation and development of the technology stack

When you are finished with this step, you will have a thorough understanding of the technology stack and its components, scalability, and potential for innovation. You will have identified any potential risks and opportunities, and any potential requirements for support, maintenance, and training.

Examining the current and future technology stack, scalability of the solution, and potential for innovation.

• Analyze the current technology stack and determine its scalability, capabilities, and potential for innovation
• Identify any potential technical issues or gaps in the existing tech stack
• Analyze the current and planned architecture of the system
• Evaluate the scalability and performance capabilities of the technology stack
• Assess the potential for future innovation of the technology stack
• Assess the impact of any new technologies on the current technology stack
• Investigate the potential for leveraging existing technologies
• Assess the ability to integrate the technology stack with other systems

Once you have evaluated the current and future technology stack, scalability of the solution, and potential for innovation, you can move on to the next step.

Intellectual Property (IP) analysis

• Research any patents, copyrights, and trademarks that the company may have
• Check to make sure that the company’s IP is legally protected and that there are no risks of infringing on existing IP
• Identify any gaps in the company’s IP protection
• Make sure that any IP that the company is using is correctly licensed and that all necessary permissions have been obtained
• Review any existing contracts to ensure that IP rights are correctly assigned and protected
• When you have completed the IP analysis, you can move on to the next step.

Reviewing pertinent IP, including patents, copyrights, and trademarks, and assessing the risk of infringing on existing IP.

• Research the target company’s IP portfolio and any relevant third-party IP rights
• Identify any existing patents, copyrights, and trademarks that may conflict with the target company’s IP
• Assess any potential infringement risks and determine what steps need to be taken to mitigate them
• Document any identified risks along with any mitigation steps
• Review the target company’s contracts and agreements to ensure that they are not in violation of any existing IP

You can check this step off your list when you have identified any existing IP, assessed the risk of infringing on it, and documented any identified risks and mitigation steps.

Regulatory analysis

• Research any relevant government regulations or laws that could affect the business
• Identify any potential compliance issues that could arise
• Examine the data privacy and security protocols of the business
• Investigate any potential liabilities that could arise from non-compliance
• Document your findings in a report

Once you have completed your research, documented your findings in a report, and identified any potential compliance issues or liabilities, you can move on to the next step of assessing any applicable regulations and potential liabilities, including data privacy and security.

Assessing any applicable regulations and potential liabilities, including data privacy and security.

• Review and analyze any applicable federal, state, and local regulations that may impact the company.
• Identify any potential liabilities, including data privacy and security, that may arise when using the company’s technology.
• Analyze the company’s policies and procedures to ensure they meet applicable regulatory requirements.
• Review the company’s security programs to ensure they adequately protect customer data and other sensitive information.
• Verify that the company has a process in place to respond to governmental inquiries and requests for data.

You can check this step off your list when you have completed the above tasks, and have a clear understanding of the company’s regulatory requirements and potential liabilities.

Human resources analysis

• Review the organizational chart
• Assess the size of the team and their experience
• Identify any potential gaps or redundancies
• Understand the team’s diversity
• Determine the team’s approach to problem solving
• Identify any potential conflicts of interest
• Analyze the team’s commitment to the project
• Evaluate the team’s ability to scale

You can check this off your list and move on to the next step when you have a thorough understanding of the size, experience, diversity, commitment, and ability to scale of the existing team.

Evaluating the existing team and organizational structure, considering employee experience and expertise.

• Analyze the current team’s experience and expertise, as well as any potential gaps
• Review organizational structure to determine who is responsible for which functions
• Evaluate the company’s employee turnover rate and hiring process
• Assess the team’s ability to work together and collaborate
• Identify any potential risks associated with team dynamics

When you have completed the above steps, you can check this off your list and move on to the next step of business operations analysis.

Business operations analysis

• Understand the existing business model and associated operations, including production and distribution
• Gather relevant documentation and data to assess the current operational process
• Analyze existing business processes and identify any inefficiencies
• Evaluate the scale and scope of current operations
• Assess the overall cost structure and potential for cost savings
• Verify the presence of standard operating procedures and quality control measures
• Determine the size and scope of the customer base
• Assess the scalability of the operations in terms of capacity and personnel
• Analyze the current production and distribution process to identify potential improvements

Once you have addressed the questions above and gathered the relevant documentation, you can check this step off your list and move on to the next step (Understanding the existing business model and associated operations, including production and distribution).

Understanding the existing business model and associated operations, including production and distribution.

• Understand the existing business model and operations, including production and distribution.
• Review the current business model, operations and production process.
• Assess the current distribution systems and processes.
• Identify any risks associated with the current business model, operations and production.
• Analyze the scalability of the current production and distribution processes.
• Investigate any potential cost-saving opportunities with the current business model and operations.

You can check this off your list when you have a thorough understanding of the existing business model and associated operations, including production and distribution, as well as any risks and cost-saving opportunities associated with them.

Legal analysis

• Collect and review company registration documents, such as the articles of incorporation, by-laws, and other relevant documents
• Research any legal issues or disputes the company is currently facing or has faced in the past
• Assess the company’s compliance with local, state, and federal laws
• Review any existing contracts and agreements the company has with other organizations
• Analyze the company’s insurance coverage and dispute resolution policies
• Identify any potential liabilities that may arise from existing contracts or operations

Once the legal analysis has been completed, you can check it off your list and move on to the next step of examining existing contracts and any potential liabilities, including review of insurance coverage and dispute resolutions.

Examining existing contracts and any potential liabilities, including review of insurance coverage and dispute resolutions.

• Review existing contracts to ensure terms and conditions are in line with company goals
• Confirm all parties are in compliance with their contractual obligations
• Evaluate any potential liabilities that may arise from existing contracts
• Review insurance coverage to ensure it covers any potential liabilities
• Assess dispute resolution processes and make sure they are up to date
• Check that all parties are aware of the contractual obligations and their rights

When you have completed the above steps, you will have a comprehensive understanding of any existing contracts and potential liabilities. You can then move on to the next step of the due diligence process, which is risk analysis.

Risk analysis

• Evaluate the financial health of the company, including its liquidity, profitability, and debt position
• Analyze potential operational risks, such as disruption of services, data privacy, and cybersecurity
• Assess any reputational risks, such as customer satisfaction, brand reputation, and public perception
• Review any potential legal or regulatory risks, such as conflict of interest, compliance requirements, and data protection
• Identify any potential risks related to the technology, such as scalability, usability, and compatibility

When you have identified and assessed all potential risks associated with the investment, you can check this step off your list and move on to the next step.

Identifying and assessing any potential risks associated with the investment, such as financial, operational, and reputational risk.

• Create a list of potential risks associated with the investment, including financial, operational, and reputational risks
• Evaluate each risk individually to determine the likelihood of it occurring and the impact it could have on the investment
• Research the target company to assess any current or past issues that could increase the risk associated with the investment
• Ask questions of the target company and its partners to gain a better understanding of the potential risks and their potential impact
• Create a document detailing the risks identified and the associated assessments
• Use the document to inform decision making around the investment

When you have completed this step, you should have a thorough understanding of the potential risks associated with the investment and their potential impact.

Exit strategy

• Develop an exit strategy timeline, including an estimated timeline for divestment
• Establish potential divestment options, such as an initial public offering (IPO), a sale to a strategic buyer, or a recapitalization
• Analyze any potential tax implications associated with the investment and establish tax optimization strategies
• Assess the financial sustainability of the company, including any potential liquidity issues
• Identify any legal or regulatory barriers to divestment

Once you have identified the exit strategy timeline, potential divestment options, tax implications, financial sustainability, and legal/regulatory barriers, you can check this step off your list and move on to the next step.

Establishing expectations for the eventual exit of the investor, including potential divestment options and timeline.

• Clearly define and agree on the desired exit timeline, taking into account the timeframes necessary for the company to reach its expected goals.
• Discuss and agree on the different options for divestment, such as an IPO, a sale to another company, or a secondary sale.
• Understand the legal implications of each option and assess the risks associated with each.
• Establish a framework for the review of potential divestment partners and any potential conflicts of interest.
• Negotiate and agree on the terms of the exit.

How you’ll know when you can check this off your list and move on to the next step:

• When all stakeholders have come to an agreement on the exit timeline, divestment options, and terms.

FAQ:

Q: How up-to-date are the laws and regulations covered by the Ultimate Tech Due Diligence Questionnaire?

Asked by David on April 2, 2022.
A: The Ultimate Tech Due Diligence Questionnaire is designed to provide comprehensive, up-to-date information about the laws and regulations affecting technology companies. It includes resources from the UK, USA, and EU jurisdictions, and is regularly updated to ensure that it reflects the latest developments in technology law.

Q: Are there industry- or sector-specific questions I should be aware of?

Asked by Nadine on October 25, 2022.
A: Yes, depending on the industry or sector your company operates in, you may need to ask additional questions to ensure you have a full understanding of the legal obligations your business faces. For example, if you are a software-as-a-service (SaaS) company, you will need to make sure you are aware of the applicable laws around data privacy and security. If you are in a B2B sector, you may need to ask questions about anti-trust laws and contract terms.

Q: How can I make sure that I’m asking all the right questions?

Asked by Tyler on December 12, 2022.
A: The Ultimate Tech Due Diligence Questionnaire is designed to provide guidance on which questions are most relevant for technology companies. However, it’s important to remember that no two companies are exactly alike - so it’s always best to consult with a lawyer or other professional who is familiar with the specific laws and regulations your company needs to comply with. Additionally, it’s wise to keep an eye out for new developments in technology law - such as changes to data privacy regulations - so that you can adjust your due diligence process accordingly.

Q: What kind of information should I be looking for when conducting due diligence?

Asked by Emma on May 7, 2022.
A: When conducting due diligence, you should focus on understanding how your business is structured and how it operates in relation to applicable laws and regulations. This includes gathering information on key personnel (such as directors and shareholders); reviewing contracts with customers, suppliers, and partners; examining business records; and assessing potential risks such as financial losses or legal liability due to non-compliance with applicable laws or regulations. Additionally, it’s important to understand any potential conflicts of interest that may exist between your company and third parties.

Q: What is the best way to ensure that my business complies with applicable laws and regulations?

Asked by David on August 18, 2022.
A: The best way to ensure compliance with applicable laws and regulations is to have a comprehensive understanding of those laws and regulations - both at a general level as well as at a specific level related to your industry or sector - and then proactively take steps to ensure that your business meets those requirements. This includes regularly reviewing contracts with customers, suppliers, and partners; conducting internal audits; monitoring changes in relevant laws; engaging legal counsel for advice; and ensuring that all key personnel understand their obligations in relation to compliance. Additionally, having an up-to-date risk management plan in place can help identify potential areas of non-compliance before they become an issue.

Q: What resources are available for staying informed about changes in technology law?

Asked by John on July 4th 2022.
A: There are a number of online resources available for staying up-to-date with changes in technology law. These include publications from industry organizations such as The Software Alliance (BSA), blogs from legal experts such as Morrison & Foerster LLP’s Technology Law Dispatch blog, legal news outlets such as Law360’s Technology section, professional networks such as Lawyerist’s Technology & Law Network group on LinkedIn, conferences such as the International Technology Law Association Conference (ITLA), and online courses such as Harvard Law School’s Technology Law & Policy Clinic (TLPC). Additionally, staying engaged with relevant organizations within your industry or sector can help you stay informed about changes in technology law that may impact your business.

Example dispute

Possible Lawsuits Involving Due Diligence Questionnaire

• Plaintiffs might raise a lawsuit referencing a due diligence questionnaire if they believe their rights have been violated, such as in cases of fraud or negligence.
• The questionnaire could be used to demonstrate that the company in question was aware of the risks related to the activity in question and failed to take adequate action.
• In a successful lawsuit, the plaintiff may be eligible to receive compensation for any damages, including medical bills, lost wages, or other financial losses.
• The plaintiff may also be entitled to punitive damages if the defendant’s conduct was particularly egregious.
• Settlement could also be reached through negotiation or mediation, with the plaintiff receiving a cash payment or other form of compensation.

Templates available (free to use)

Due Diligence Questionnaire For Ip And It Part Of Asset Purchase

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