Due Diligence Questionnaires

Why DDQs are important for fundraising

Due Diligence Questionnaires (DDQs) can play a crucial role in the fundraising process for venture capital (VC) funds. Limited Partners (LPs), such as institutional investors, use DDQs to conduct due diligence on VC funds before deciding to invest. In simple terms, DDQs are a kind of checklist that helps both investors and funds make smart and informed decisions. Let's break down why DDQs matter and how they make things smoother.

Efficiency made easy

Think of a DDQ as an organized file that holds all the important details about a venture capital fund. Instead of wasting time on endless emails and calls, investors can quickly check this file to see if a fund is worth their attention. There are standard questions in the DDQ that already cover the basic information. This means less back-and-forth communication, saving time for everyone involved in the fundraising process.

ILPA's DDQ

The Institutional Limited Partners Association (ILPA) has played a pivotal role in enhancing the due diligence landscape by designing a standardized DDQ template. This template alleviates the administrative burden on LPs and GPs by streamlining the most common and crucial diligence questions posed by investors.

ILPA's DDQ comprehensively addresses a spectrum of topics crucial to fund diligence. These include but are not limited to, general information about the firm and fund, succession planning, investment strategy, co-investments, GP-led secondaries, credit facilities, investment process, team dynamics, alignment of interests, market environment, fund terms, firm governance, risk, compliance, track record, accounting, valuation, reporting, legal considerations, data security, technology, third-party engagements, ESG criteria, and diversity, equity, and inclusion practices.

Final thoughts

For emerging fund managers we believe that having DDQs can only be beneficial as they help both LPs and fund managers with due diligence. ILPA’s DDQ template can be a great starting point when designing a DDQ. Fund managers should see the DDQ as an opportunity to tell the story of the fund and its uniqueness while providing all fund-specific information.

In conclusion, the DDQ can play a pivotal role in enhancing the efficiency and effectiveness of the venture capital fundraising process. By centralizing information, minimizing repetitive communication, and allowing for more in-depth responses, the DDQ can contribute significantly to the fundraising process of a fund.

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Follow us on Twitter @LP_Perspectives. None of the above should be considered fund advice, financial advice or even legal advice. The views and writings above are strictly that of the author(s) and do not in any way represent past or present employers.