Before investing in a company, a venture capital firm goes through a stringent review process to ensure that there are no skeletons in your corporate closet and that the perceived business opportunities are in fact real. The due diligence process generally focuses on two aspects: business diligence and legal diligence.

The business due diligence process accomplishes several objectives. First of all, it is important for the venture capital firm to independently confirm your assertions about your company's product or service and the market itself. Thorough competitive and financial analyses will help investors gauge the risks they will be assuming and the potential return on their investment. If your business plan hinges on technology, the venture firm will also need to assess your technology to make sure that there are no flaws in or infringements on patents, for instance.

If you are seeking later-stage funding, the venture firm will also contact key customers and suppliers to do reference checks. Industry experts may also be called on to discuss your company's potential.