GUIDE THREE

Our Due Diligence Process

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Assessing a Business
 
Conducting due diligence is an important process of critically evaluating a business and its potential for generating profits and future growth. FrontFundr performs due diligence by gathering and assessing the necessary information from businesses seeking to use our platform. We also aim to empower our investors by helping them understand how to conduct their own review of investment opportunities.
Investment Decisions

Investing in early-stage companies is inherently high-risk. This fact, coupled with the diverse range of businesses raising capital on FrontFundr’s platform, means we cannot prevent situations which may lead to the loss of capital for any individual or group of investors. Only 51 percent of small and medium-sized businesses in Canada survive more than five years. As such, the opportunity to produce returns as an early investor must be equally balanced with the possibility that all the capital you invest may be lost.

FrontFundr does not favour or endorse any businesses raising capital on our platform over any other, nor do we provide investment advice to potential investors. We strongly encourage all FrontFundr investors to undertake their own due diligence and seek guidance from independent professional legal, financial and tax advisers before committing their capital to any company.

 

Selection Process

FrontFundr’s due diligence is thorough and comprehensive. We often engage with businesses applying to use our platform for periods ranging between 2 to 6 months. We learn about the business and its management team and gather materials to help us reasonably determine the current and potential health of the business. Actions which FrontFundr undertakes within the review of the material may include, but are not limited to:
    • Review of the company’s incorporation documents, existing Shareholder Agreements, Subscription Agreements or Investment Agreements;
    • Review any known commercial loan agreements, convertible loan instruments and any director and/or shareholder loan agreements;
    • Review of management history and current activities;
    • Review of any intellectual property rights;
    • Review of the share registry and capitalization table;
    • Request information on any past, current or anticipated litigation;
    • Search of available information from civil, criminal court or bankruptcy records;
    • Search of available information from regulatory authorities;
    • Review of provided financial information;
    • Review the company’s forward-looking statements and associated marketing materials, business plan or pitch deck;
    • Review the company’s valuation and any associated revenue projections; or
    • Request additional documentation and verification to support 3rd party relationships, service providers, users or customers.
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We Do Not

    • Set the valuation. The company decides to price their investment offering and ultimately investors decide if they are willing to invest at that price;
    • Audit financial statements or any special purpose engagement of the company;
    • Conduct sensitivity or scenario analysis on financial forecasts;
    • Review content of investor events that are not organized by FrontFundr;
    • Provide legal, financial, valuation, or accounting opinions;
    • Provide any form of assurance or opinions on a business;
    • Assert that investment documents used in the raise are appropriate; or
    • Make claims asserting that an investment is safe.
FrontFundr performs due diligence on every company wishing to raise on its platform. Additionally, we advise all FrontFundr clients to carry out their own due diligence and evaluation of each potential investment opportunity. This includes conducting your own research on a company, identifying the key risks associated with each investment and consulting your team of professional advisors where appropriate. As a guide, prospective investors should also take care to:
    • Carefully read all information on a company’s profile page and within the offering documents;
    • Review and consider the risk warnings; and
    • Recognize that many early-stage companies fail and that forward-looking statements and entrepreneur’s expectations may not materialize.
Questions are the best way to gain deeper insights. FrontFundr encourages investors to engage with the management of companies on our platform through the Q&A (question and answer) feature on each issuer’s profile page. Please visit any offering in our Investment Opportunities to learn more.

The Next Step

 

Now you’ve got a good grasp of the basics, why not take a look at our investment opportunities to see if there is anything that catches your eye!? Getting started is quick, easy and straightforward - you can make an investment starting from only $250 and in only 12 minutes!

 
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