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Anecdotally, I'll mention that for the two founder level pitches/seed raises I've been involved in, there was absolutely no technical diligence at all. Nor was

by arcanus 10y ago

Anecdotally, I'll mention that for the two founder level pitches/seed raises I've been involved in, there was absolutely no technical diligence at all. Nor was there really any technical discussion at the YC pitch (we did not get selected, admittedly). I've always conjectured that this is why vetting the team is considered such a critical element. For instance, I have a Ph.d. and so I've found people just assume I know what I am doing in terms of tech and algorithms. This can be a disadvantage when I want honest feedback, actually. Most VCs are much better equipped to discuss the business related aspects than anything technical. In fact, I would be hard pressed to evaluate most start-up technology outside my fields of study, because it becomes so specialized so quickly.

vidarh 10y ago
My experience is that technical due diligence is much more likely to be thorough in cases where someone is acquiring a slower growing, more established business. If you're buying a startup, chances are you're buying into the idea and the team much more than the current technical solution, and if you're right the margin for error on the cost side are huge, so you can afford taking the risk of having spend extra cleaning up a messy code base. Apart from rare areas where solving a particularly hard problem is part of the value, the underlying tech is a distraction if the team is good and the idea is good. But if you're buying a "boring" established business with a moderate growth rate for its market position and revenue, whether or not you'll end up spending 20% on top of the acquisition cost over the next year fixing crumbling infrastructure suddenly matters a lot more.
ridgeguy 10y ago
My anecdote tracks with yours. Ours was a materials startup, no code involved, but totally dependent on a then-new type of plasma chemistry. Intel Capital brought over their Wall of Faces (mostly technologists) for a "tech DD meeting". They asked almost no tech questions. All the questioning went to our business model, transition from custom proto to volume mfg, and building protectable IP. Our tech PowerPoint stack remained unrun, and I was very glad we'd stayed up all night doing 5-year financial pro formas. I.C. invested. But I was surprised at how little they vetted our technology before signing the terms sheet.

by arcanus 10y ago

vidarh 10y ago

My experience is that technical due diligence is much more likely to be thorough in cases where someone is acquiring a slower growing, more established business. If you're buying a startup, chances are you're buying into the idea and the team much more than the current technical solution, and if you're right the margin for error on the cost side are huge, so you can afford taking the risk of having spend extra cleaning up a messy code base. Apart from rare areas where solving a particularly hard problem is part of the value, the underlying tech is a distraction if the team is good and the idea is good. But if you're buying a "boring" established business with a moderate growth rate for its market position and revenue, whether or not you'll end up spending 20% on top of the acquisition cost over the next year fixing crumbling infrastructure suddenly matters a lot more.

ridgeguy 10y ago

My anecdote tracks with yours. Ours was a materials startup, no code involved, but totally dependent on a then-new type of plasma chemistry. Intel Capital brought over their Wall of Faces (mostly technologists) for a "tech DD meeting". They asked almost no tech questions. All the questioning went to our business model, transition from custom proto to volume mfg, and building protectable IP. Our tech PowerPoint stack remained unrun, and I was very glad we'd stayed up all night doing 5-year financial pro formas. I.C. invested. But I was surprised at how little they vetted our technology before signing the terms sheet.