The due diligence process in venture capital : an appraisal of its applicability in Malta

Abstract

Venture capital is a form of investment finance which is already practised in Malta; however further exploitation of such an effective tool could prove to be very beneficial within the local economy, in its critical role of generating economic growth. The scope of this dissertation is to focus on due diligence which is a vital part of the venture process. Due diligence is an investigation which the venture capitalist ought to do before making the decision to invest in the entity's equity. Thus, its applicability is a determinant factor to the performance of venture capital. This dissertation will primarily determine what constitutes a thorough due diligence process and subsequently it will evaluate the current status of venture capital in Malta. Finally, an appraisal of the applicability of venture capital due diligence to the local scene will be made. This entails a comparison of the due diligence carried out abroad with that carried out by the local venture capitalists. Any differences will be highlighted and explained with reference to the specific characteristics of venture capital in Malta. Moreover, suggestions of how due diligence could be adapted to the local circumstances will be made.