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What does Alta consider when conducting due diligence on potential investment opportunities?
What does Alta consider when conducting due diligence on potential investment opportunities?
Written by Eunice Chuah
Updated over a week ago

The organization of the company
Alta requires information that shows the issuer company has taken steps necessary to organize as a corporation or LLC in its state of organization, is in good standing, and that the securities being issued will be duly authorized and validly issued.

The corporate structure and ownership
Alta works with the issuer company to disclose its organizational structure, affiliated entities, and current capitalization.

The people behind the company
Alta helps the issuer company disclose who is behind the operations and strategy of the company, along with their previous related experience, and Bad Actor Reports to provide evidence that the company is not disqualified from proceeding with its offering.

Information provided to investors
Alta checks that the issuer company is providing clear disclosure of its financial situation, business origins, and operations, and legal authority to engage in its business activities.

Investor information and terms of the offering
Alta reviews for consistency in each instance where the issuer company describes the offering terms and identifies to investors how the issuer company reached its current valuation and will track and keep in touch with its security holders.

Review of transaction documents
Alta performs an independent review of transaction documents to check for red flags & conformance with stated terms.

Business due diligence
Alta conducts research and due diligence on each company before it is able to accept investments on the Alta platform in order to determine:
(1) its viability as an investment opportunity and
(2) the key risks associated with that opportunity. Alta takes a dynamic, multi-faceted approach to evaluate individual offerings, recognizing that a standard scorecard model cannot be applied to the unique situations many startup companies face.

Particular focus is paid to the following issues throughout the due diligence process:

  • Problem or inefficiency being addressed

  • Product/service overview, stage of development, and anticipated milestones

  • Demonstrated traction (e.g. revenue, pre-sales, purchase orders, signed contracts, media coverage, awards, etc.)

  • Data to support claims made in marketing materials (e.g. user/customer metrics, signed contracts and agreements, product demonstrations, etc.)

  • Growth strategy

  • Employees and advisors (including ownership structure)

  • Addressable market (e.g. size, growth, penetration, etc.)

  • Competitive landscape and industry dynamics

  • Exit opportunities

  • Intellectual property

  • Historical financials

  • Financial projections (including error-checking, evaluation of key assumptions and reconciliation to stated growth plan)

  • Reference checks (e.g. previous investors, advisors, etc.)

  • Investment overview (including determination of key terms, uses of funds, and current and previous investors)

Investment Committee review
The findings of the foregoing review are presented to an internal Investment Committee comprised of senior executives of Alta, which may approve, reject, or require additional information for the offering. Upon approval by the Investment Committee and following the on-boarding process, and offering can begin accepting investments online.

General considerations

  • Not withstanding the foregoing, these investments are illiquid, risky, and speculative and you may lose your entire investment. Additionally, the foregoing process does NOT guarantee that any company will be successful or that you will receive a positive return on your investment.

  • The foregoing summarises our standard process. However, each diligence review is tailored to the nature of the company, so the aforementioned process is not the exact process for every issuer.

  • Completing the vetting process does NOT guarantee that the company has no outstanding issues or that problems will not arise in the future.

  • While the foregoing process is designed to identify material issues, there is no guarantee that there will not be errors, omissions, or oversights in the due diligence process or in the work of third-party vendors utilized by Alta.

  • Each investor must conduct their own independent review of documentation and perform their own independent due diligence and should ask for any further information required to make an investment decision.

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