1. what is investment due diligence advice

Investment due diligence consultation, also known as Due Diligence (DD), generally refers to a comprehensive and in-depth review of the historical data and documents of the enterprise, the background of the management personnel, market risk, management risk, technical risk and capital risk after reaching an initial cooperation intention between the investor and the target enterprise.

The main purpose of investment due diligence consulting is to solve the information asymmetry between the two sides of the investment and help investors further determine the value and risk of the enterprise. The reason is very simple. Only by contacting the core team of the company in the early stage, investors cannot fully understand a company. Even if investors are optimistic about the company's business and team, there will still be many concerns, which need to be resolved through more in-depth investigation. Therefore, investment due diligence advice is a protective measure for the interests of investors.

In fact, for the enterprise team, investment due diligence consultation is also an excellent opportunity to help the team complete a re-combing and understanding from the inside to the outside. Even if the financing cannot be reached immediately, at least the team can clearly see how many pounds the company has and what aspects need to be optimized and improved. Over the years, in the process of helping companies raise capital, we often help companies complete due diligence before contacting investors, with the aim of helping them complete a system review and mitigate risks in advance.

Four core elements of 2. investment due diligence consulting

The content and scope of investment due diligence consulting are usually customized according to the needs of investors, the characteristics of the target enterprise, the characteristics of the industry and other factors, and there is no fixed set of standards. However, from our many years of investment due diligence consulting practice at Champ Consulting Group, it can generally be summarized into the following four core elements:

Basic situation and core team

Historical Fundraising and Investment Performance

Investment strategy and reserve projects

Governance and Management

Below we will introduce these four elements in detail.

(I) Basic Situation and Core Team

When consulting on investment due diligence, we should first pay attention to the basic situation and core team of the investment due diligence consulting institution. We can get a basic understanding of the qualification, team members and information disclosure of the investment due diligence consulting institution by checking the publicity of the fund industry association. Then, by consulting the official website of the investment due diligence consulting institution and other public channels, understand its focus on investment areas, past investment cases and performance, salary and incentive mechanism, and understand the experience and professional background of the core members of the investment team.

In addition, the investment due diligence advisory body in the proposed fund in the allocation of energy, team cooperation and other circumstances should also be concerned. For example, Shangpu Consulting Group is a well-known independent third-party research and investment and financing consulting organization in China, dedicated to providing professional solutions for corporate strategic decision-making. As a foreign-related investigation and licensing unit of the the People's Republic of China National Bureau of Statistics, Shangpu Consulting not only serves Chinese domestic enterprises, but also helps foreign enterprises achieve greater success in the Chinese market. The core team of Shangpu Consulting is composed of professionals with rich experience in investment due diligence consulting, covering investment, industry, business, finance, law and other fields, and can provide investors with a full range of investment due diligence consulting services.

(II) Historical Fundraising and Investment Performance

The past fund management scale of investment due diligence advisory institutions reflects their fund-raising ability, investment operation ability and anti-risk ability. When conducting investment due diligence consulting, it is necessary to pay attention to the past fund-raising scale, use and operation of funds, and the source of funds raised by the investment due diligence consulting agency, and make a comprehensive judgment on the reliability and feasibility of the fund-raising channel.

The past investment performance of investment due diligence advisory bodies is one of the core elements of investment due diligence advisory concern, which can comprehensively reflect the professional capabilities of the investment team. In the due diligence process, for withdrawn projects, investment proposals, investment decisions and other relevant documents should be consulted, and based on this, a comprehensive evaluation of the professional ability of the investment team, the pre-investment and post-investment management ability of the project and the ability to import resources should be conducted. For projects that have not yet been withdrawn, factors such as current valuation, exit path, difference between existing performance and expected investment can be considered. For example, Shangpu Consulting Group has more than ten years of professional experience in the field of investment due diligence consulting, has provided professional services to more than 1000 outstanding companies, and has always been the IPO with the largest number of declared projects accepted by the China Securities Regulatory Commission and the exchange. One of the refinancing investment feasibility study consulting institutions is one of the first consulting institutions in the country to obtain the "Securities Investment Consulting Business Qualification Certificate" issued by the China Securities Regulatory Commission.

(III) Investment Strategies and Reserve Projects

The investment strategy of an investment due diligence advisory body is a concrete manifestation of its investment philosophy and an important influence on its investment performance. When conducting investment due diligence consulting, it is necessary to understand the investment positioning, investment field, investment stage, investment standard, investment process, etc. of the investment due diligence consulting institution, as well as the rationality, feasibility and effectiveness of its investment strategy. In addition, attention should also be paid to the reserve projects of the investment due diligence advisory body, including the quantity, quality, source, type and distribution of the reserve projects, as well as the processes and methods of screening, evaluation and follow-up of the reserve projects.

The investment strategy and reserve projects of the investment due diligence consultant can be understood by consulting the investment strategy report, reserve project list, project evaluation report and other relevant documents of the investment due diligence consultant, as well as communicating with members of the investment team. For example, the investment strategy of Shangpu Consulting Group is based on industry research, with investment due diligence consulting as the core, and investment decision-oriented, providing investors with a full chain of investment consulting services. Shangpu Consulting Group focuses on emerging industries, high-tech industries, consumption upgrading industries and other fields, covering seed, angel, Pre-A, A, B and other investment stages, as well as mergers and acquisitions, listing and other investment events. Shangpu Consulting Group has a professional project discovery and evaluation team, through a multi-channel, multi-dimensional approach, constantly looking for and screening high-quality investment projects, and in-depth due diligence and risk assessment of the project, to provide investors with high-quality investment advice.

(IV) Governance and Management

The level of governance and management of investment due diligence advisory bodies directly affects the efficiency and effectiveness of their investment operations. When conducting investment due diligence consulting, it is necessary to pay attention to the organizational structure, decision-making mechanism, internal control, risk management, information disclosure and other aspects of the investment due diligence consulting agency, as well as the standardization, rationality and effectiveness of its governance and management. In addition, attention should also be paid to the compliance of investment due diligence consulting agencies, including whether they comply with relevant laws and regulations, whether there are violations of laws and regulations, and whether there are litigation and arbitration.

The governance and management of investment due diligence consulting institutions can be understood by consulting the articles of association, organizational chart, decision-making flow chart, internal control system, risk management system, information disclosure system and other relevant documents of investment due diligence consulting institutions, as well as communication with the management, partners, employees and other relevant personnel of investment due diligence consulting institutions. For example, the governance and management system of Shangpu Consulting Group is constantly improved and optimized based on international standards and industry best practices, combined with its own characteristics and development stages. Shangpu Consulting Group adopts the partnership system, implements the decision-making mechanism of democratic centralism, establishes a sound internal control and risk management system, and conducts regular information disclosure and audit to ensure the standardization, efficiency and transparency of investment due diligence consulting business. Shangpu Consulting Group strictly abides by relevant laws and regulations and actively fulfills its social responsibilities. There has been no violation of regulations or arbitration.

3. epilogue

Investment due diligence consulting is a professional service that has an important impact on investors' investment decisions. Choosing a professional, reliable and suitable investment due diligence advisory body is an important task for investors. Taking Shangpu Consulting Group as an example, this paper introduces the four core elements of investment due diligence consulting, namely, the basic situation and core team, historical fund-raising and investment performance, investment strategy and reserve projects, governance and management, and the specific operating processes and methods in these areas. The purpose of this paper is to provide investors with a reference framework for investment due diligence consulting, and to help investors choose professional, reliable and appropriate investment due diligence consulting agencies to escort investment decisions.