Angel investment is also called a seed investment. It is a private investment provided by a single individual, usually for startups and entrepreneurs, in exchange for a share in the company or a part of the business. Indeed, Saudi Arabia is a country going in strong with many SMEs, ventures, and startups accompanying several angel investors. If you are looking to be an awarder of an Angel investment, then you would find the section below helpful as it gives express details of what to look out for before investing in Saudi Arabia.
What is Due Diligence for Angel Investments
Recently, Saudi Arabia has witnessed the significant establishment of startups and SMEs. The country itself is dedicated to seeing that it assists in these ventures in any way it can, mainly through Angel investment. However, due to this proliferation, it is always important for investors to have their eyes peeled out for startups’ interest and benefits. Due diligence gives a general overview of the risks, strengths and witnesses. When conducted properly, it helps to root out dangers with the company’s goals and product misalignment. Investing in any venture without due diligence would be going in blindly.
How can you Conduct Diligence for Angel Investment in Saudi Arabia
There are no rules for conducting due diligence before investing in a venture in Saudi Arabia. Nonetheless, some critical boxes must be checked, and essential steps must be undertaken.
Identification of Risks:
The idea of a venture pitch before the investment is to unveil critical areas of the business, such as market opportunity, competition, and current and potential financial status. To a considerable degree, it helps the investor to identify the benefits and losses that may accrue if they go ahead with the investment.
In many cases, due diligence may also need to extend to the legal realm. This part of due diligence involves a look into the regulatory compliance state of the company. The company must be assessed as to its compliance with corporate laws and other sector-specific laws. Legal diligence helps affirm a company’s capacity to invest in the venture.
Financial diligence will involve taking time to access the company’s financial records and reports. Profit and loss statements and balance sheets must be critically reviewed before investment. An investor must also look at the stake of other investors, the company’s financial growth projections, working capital, implied valuation, percentage ownership and so on.
Operational and Market Diligence:
For an investor, it is essential to consider the company’s product and service flow. That is the business model, operational risks and model, opportunities, and other types of stakes in the company. Market due diligence will entail looking at the strategic market size and projection and the company’s market share to assess its likely successes.
Several companies have due diligence services and can readily assist investors in verifying the worth of a company before investment. One cannot underestimate the importance of due diligence on the part of an angel investor, any shortcomings on this part can lead to serious losses. However, if you are to conduct personal due diligence, the tips and areas above are sure to be of invaluable help.