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What is VC due diligence like?

by ericb 9y ago

jacquesm 9y ago
I've written about that: https://jacquesmattheij.com/due-diligence-survival-guide https://jacquesmattheij.com/due-diligence-survival-guide
noer 9y ago
I think it depends on the fund. Jonathan Hsu of Social Capital wrote a 5 part blog post on how they do it [0]. They even built a tool that companies interested in pitching upload their user & revenue data into, it's pretty neat. [0]https://medium.com/swlh/diligence-at-social-capital-part-1-accounting-for-user-growth-4a8a449fddfc https://medium.com/swlh/diligence-at-social-capital-part-1-a...
cynusx 9y ago
Essentially they will build a hypothesis around what makes your company worth investing in (e.g. great goto market, passionate customers, technology likely to be bought, ...) and will focus on double-checking what they believe needs to be true for that is actually true. Essentially it's broken down into: Technology due diligence (by an outside contractor) - understand architecture - interview CTO - understand technology choices Essentially the technical DD is whether your CTO knows what they he is doing and can actually deliver the roadmap. Go-to-market DD - call with your channel partners if you have them Product DD - call with a sample of your customers - Actually try the product themselves Team DD - reference calls on all founders + backdoor references - CV's of core team Business audit - P&L - cashflow - cap table - sales activity (growth, churn, acquisition) Due Diligence should not raise any surprises and confirm what you have pitched them. It's a very rational thing to do before you wire a few million into a company you have met only a few times.
- jacquesm 9y ago
  > Due Diligence should not raise any surprises and confirm what you have pitched them. This is key and something that I have explained multiple times over the last couple of years to people that really did not get why a surprise or two during a DD were a 'big deal'. DD is confirmatory, not discovery.

What is VC due diligence like?

by ericb 9y ago

What is VC due diligence like?

I've written about that: https://jacquesmattheij.com/due-diligence-survival-guide https://jacquesmattheij.com/due-diligence-survival-guide

noer 9y ago

I think it depends on the fund. Jonathan Hsu of Social Capital wrote a 5 part blog post on how they do it [0]. They even built a tool that companies interested in pitching upload their user & revenue data into, it's pretty neat. [0]https://medium.com/swlh/diligence-at-social-capital-part-1-accounting-for-user-growth-4a8a449fddfc https://medium.com/swlh/diligence-at-social-capital-part-1-a...

cynusx 9y ago

Essentially they will build a hypothesis around what makes your company worth investing in (e.g. great goto market, passionate customers, technology likely to be bought, ...) and will focus on double-checking what they believe needs to be true for that is actually true. Essentially it's broken down into: Technology due diligence (by an outside contractor) - understand architecture - interview CTO - understand technology choices Essentially the technical DD is whether your CTO knows what they he is doing and can actually deliver the roadmap. Go-to-market DD - call with your channel partners if you have them Product DD - call with a sample of your customers - Actually try the product themselves Team DD - reference calls on all founders + backdoor references - CV's of core team Business audit - P&L - cashflow - cap table - sales activity (growth, churn, acquisition) Due Diligence should not raise any surprises and confirm what you have pitched them. It's a very rational thing to do before you wire a few million into a company you have met only a few times.

jacquesm 9y ago
> Due Diligence should not raise any surprises and confirm what you have pitched them. This is key and something that I have explained multiple times over the last couple of years to people that really did not get why a surprise or two during a DD were a 'big deal'. DD is confirmatory, not discovery.