Due Diligence Deep Dive - Nailing the People & Culture Check-up

Hi again, founders! We’re nearing the end of our series, and today we’re tackling something that can catch even the most seasoned start-ups off guard: due diligence. If you’re getting ready for a funding round, you already know the importance of having your financials in order, but did you know that investors also scrutinise your people strategy and company culture during this process? Don’t worry—I’ve got you covered with an insider’s checklist to make sure you pass with flying colours.

Why People & Culture Matter in Due Diligence

Investors want to know if your team is scalable, and they need to be confident that your company culture will support growth. A 2019 study by PwC found that 79% of investors see governance and culture as crucial to a company’s success—yes, even more so than immediate financial performance!

Beyond numbers, investors are looking at how your start-up treats its people, how cohesive your team is, and whether your leadership can inspire growth. This is especially important in the UK and Europe, where social responsibility and employee wellbeing are increasingly seen as key indicators of a business’s long-term viability.

The People & Culture Due Diligence Checklist

1. Employee Contracts and Benefits Make sure all your employee contracts are up to date, including clearly defined terms around equity, pay, and benefits. Investors will check to see if your employment terms are compliant with UK and EU laws, including minimum wage, working hours, and holiday entitlement. Ensure that any bonus structures or equity incentives are documented properly.
2. HR Policies and Procedures Investors will want to know that you’ve got the basics covered when it comes to HR. This includes processes for hiring, onboarding, performance reviews, and even offboarding. You should also have clear policies on things like parental leave, remote work, and diversity and inclusion.
3. Team Structure and Key Roles Investors will look closely at your leadership team and key hires. They want to know if you have the right people in place to execute your business plan. A study by ScaleUp Institute UK found that 75% of scale-up businesses cited leadership talent as a major factor in attracting investors. Make sure you can clearly demonstrate how your team is equipped to grow the business.
4. Company Culture and Employee Engagement Culture is increasingly a top concern for investors. A toxic or disengaged workforce can derail even the most promising startups. Make sure you’ve got employee engagement data at hand, and be prepared to show how you’re fostering a positive, inclusive work environment. Having solid engagement metrics will set you apart.
5. Turnover and Retention Rates High turnover is a red flag for investors. Be prepared to explain any major changes in team composition and what you’re doing to retain top talent. Offering flexible working options, stock incentives, or career development opportunities are all things that can help with retention.

Conclusion: Getting your people and culture strategy ready for due diligence is crucial. By ensuring your HR processes are tight, your team is strong, and your company culture is solid, you’ll not only impress investors but also set your startup up for future success.