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They would not have looked at the API docs of either the startup they are investing in or their competitor (99.95%). I've worked as VC and technical detail at s

They would not have looked at the API docs of either the startup they are investing in or their competitor (99.95%). I've worked as VC and technical detail at such a level is basically non existent. Economics, team, market take up the vast majority of the effort.

jacquesm 7y ago
We do technical due diligence, because at the VCs this specialty is usually not present.
- leesalminen 7y ago
  I’ve been through a technical due diligence for an acquisition and the process was severely lacking. In total it took ~8 hours (compared to ~80 for financial diligence). It felt like a once-over smoke test to eek out any major red flags. I almost wish you had done my technical diligence, Jacques. I spent a week preparing for it and was very proud of what I’d built.
  - jacquesm 7y ago
    We get that a lot actually. We do quite a few 'B' and later rounds (43 deals last year!) and apparently we're the hardest exam to pass for, but the people we work with are generally really happy that they finally get to show off all their hard work to people who really appreciate what they've done. It's five of us for a week with a super intensive interview on the Wednesday and it is always the highlight of the week for me. What is also neat is that most of these turn into very long term relationships post deal, not necessarily financial ones, just that the interview day makes the whole thing a two-way street where the tech team will occasionally reach out when they are stumped on some problem or need outsider perspective.
  - jjeaff 7y ago
    Ya, we got very close to closing with a VC in SV. Their technical due diligence consisted of one of their contacts from Google calling and asking me questions about our tech stack. It appeared that the Google dev derailed the deal because we were building our product in PHP. That's how they decided we must not know what we are talking about.
    - jacquesm 7y ago
      Did you get funded with another party?
      - jjeaff 7y ago
        Yes, we raised millions through a few other VCs.
        jacquesm 7y ago
        Good to see that that did not reduce your long term chances. I really don't like these out-of-hand dismissals without doing the homework first, PHP is not exactly the worlds most elegant language (to put it mildly) but it is definitely not a disqualifying one either.
jartelt 7y ago
This is correct. The odds that a VC investment fails because the company copied work and gets caught/sued is very low. Thus, there is little incentive to dig through all the weeds to ensure that absolutely no work was copied. Ultimately, the VCs probably just ask the founders "Hey, your product looks very similar to product A, how is yours different and did you develop it on your own?" If the founder denies copying and gives a reasonable answer for how they developed it on their own, the VC then makes a judgement. They also may hire some consultants or have some outside experts look at the tech stack to make sure no red flags pop up. However, you can't dig through every line of code and every document in diligence and compare it to several other companies code/docs. It would take too long and everyone involved (VCs, lawyers, start-up) would be annoyed.

jacquesm 7y ago

We do technical due diligence, because at the VCs this specialty is usually not present.

leesalminen 7y ago
I’ve been through a technical due diligence for an acquisition and the process was severely lacking. In total it took ~8 hours (compared to ~80 for financial diligence). It felt like a once-over smoke test to eek out any major red flags. I almost wish you had done my technical diligence, Jacques. I spent a week preparing for it and was very proud of what I’d built.
- jacquesm 7y ago
  We get that a lot actually. We do quite a few 'B' and later rounds (43 deals last year!) and apparently we're the hardest exam to pass for, but the people we work with are generally really happy that they finally get to show off all their hard work to people who really appreciate what they've done. It's five of us for a week with a super intensive interview on the Wednesday and it is always the highlight of the week for me. What is also neat is that most of these turn into very long term relationships post deal, not necessarily financial ones, just that the interview day makes the whole thing a two-way street where the tech team will occasionally reach out when they are stumped on some problem or need outsider perspective.
- jjeaff 7y ago
  Ya, we got very close to closing with a VC in SV. Their technical due diligence consisted of one of their contacts from Google calling and asking me questions about our tech stack. It appeared that the Google dev derailed the deal because we were building our product in PHP. That's how they decided we must not know what we are talking about.
  - jacquesm 7y ago
    Did you get funded with another party?
    - jjeaff 7y ago
      Yes, we raised millions through a few other VCs.
      - jacquesm 7y ago
        Good to see that that did not reduce your long term chances. I really don't like these out-of-hand dismissals without doing the homework first, PHP is not exactly the worlds most elegant language (to put it mildly) but it is definitely not a disqualifying one either.

jartelt 7y ago

This is correct. The odds that a VC investment fails because the company copied work and gets caught/sued is very low. Thus, there is little incentive to dig through all the weeds to ensure that absolutely no work was copied. Ultimately, the VCs probably just ask the founders "Hey, your product looks very similar to product A, how is yours different and did you develop it on your own?" If the founder denies copying and gives a reasonable answer for how they developed it on their own, the VC then makes a judgement. They also may hire some consultants or have some outside experts look at the tech stack to make sure no red flags pop up. However, you can't dig through every line of code and every document in diligence and compare it to several other companies code/docs. It would take too long and everyone involved (VCs, lawyers, start-up) would be annoyed.