Issue link: https://htpgraphics.uberflip.com/i/392122
45 It is best to work for the VC and for them to pay you whatever the outcome. You may feel able to accept an arrangement whereby the Company pays you if the investment takes place within a defined period and the VC pays otherwise, but be very sure of the Company's financial position before you accept any other arrangement and always get all parties to agree to the arrangement in writing. Financial advice Do not give financial advice unless you are explicitly authorised to do so by the Financial Conduct Authority, as to do so may be a criminal offence. Make it clear that you will not be doing so. Rather, you will be advising on the originality or viability of the Company's technology, or the size of the market, or another technical task. Risk Despite the above, there are particular risks associated with due diligence work. After investments are complete, virtually no attention is paid to any due diligence work unless something goes wrong. If, for example, it turns out that the Company's technology is not original or unique, and if that has (as it is likely to) a substantial impact on the value of the Company, the relevant due diligence report (yours) will be carefully reviewed. Some organisations may assume that, if they have lost substantial sums of money by acting on advice for which they have paid (as they see it), those responsible for such advice must be in the wrong and should be sued. The risk of this actually happening is often reduced by practical considerations. (Do you have the money to reimburse them even if they win the case?) Nevertheless do not rule out the possibility of legal action. Take particular care in phrasing of proposals and reports to avoid over-statement. The higher fees charged for due diligence work usually reflect the risk involved and the indemnity insurance costs. Company input You will need, with the VC's permission, to run your initial results past the Company and to take account of their comments. There can be differences of opinion between the consultant and the Company about matters that may affect the Company's prospects of investment. You should give the Company the chance to correct any misunderstandings. It would be prudent to draw attention in your report to any outstanding differences of opinion. Managing Risk Section 6