3 ms·

Have VCs started skimping on DD because problems come up so rarely? Lightspeed (who led the last round for these guys) isn't a no-name firm, they invested in Sn

Have VCs started skimping on DD because problems come up so rarely? Lightspeed (who led the last round for these guys) isn't a no-name firm, they invested in Snap, GrubHub, Telegram, etc. Surely they have the experience to find out gigantic major problems like this? This feels like something that should've come up in diligence before they sent them 120 million bucks... There are so many places it could've shown up or at least been hidden in a way that should've raised some flags.

teej 6y ago
I’ve heard this as a rumor, yes.
WrtCdEvrydy 6y ago
This is because who pays for Due Diligence... if you are paying you can influence it. I'd love for there to be a firm that did a 50/50 escrow for DD.
- billyhoffman 6y ago
  The VC firm pays for their own DD. Certainly if they are leading the round. Initial meeting-> NDA -> some due diligence -> letter of intent/term sheet (depending on the transaction) -> 30-45 days of very deep due diligence.
elliekelly 6y ago
What’s absolutely stunning to me is the (former) CEO quote in the article says the company was under SEC investigation for fraud as early as November of last year. And given that the DOJ complaint alleges the fraud occurred between January 2019-February 2020 I would be inclined to believe it. (Fraud doesn’t tend to just stop of it’s own accord.) So was the investigation disclosed to Lightspeed and they decided to invest anyway? Who on earth would invest with someone currently under investigation for a scheme to defraud investors? And if it wasn’t disclosed, why not? Did that not come up at all during due diligence?
- yesbabyyes 6y ago
  In this case the due diligence, while quite due, perhaps wasn't very diligent.
marcinzm 6y ago
Based on other comments, NS8 was audited by Ernst-Young and passed. So they had an expert do an audit and find no issues.
- everybodyknows 6y ago
  >Ernst-Young Wirecard's long-time auditor!

teej 6y ago

I’ve heard this as a rumor, yes.

WrtCdEvrydy 6y ago

This is because who pays for Due Diligence... if you are paying you can influence it. I'd love for there to be a firm that did a 50/50 escrow for DD.

billyhoffman 6y ago
The VC firm pays for their own DD. Certainly if they are leading the round. Initial meeting-> NDA -> some due diligence -> letter of intent/term sheet (depending on the transaction) -> 30-45 days of very deep due diligence.

elliekelly 6y ago

What’s absolutely stunning to me is the (former) CEO quote in the article says the company was under SEC investigation for fraud as early as November of last year. And given that the DOJ complaint alleges the fraud occurred between January 2019-February 2020 I would be inclined to believe it. (Fraud doesn’t tend to just stop of it’s own accord.) So was the investigation disclosed to Lightspeed and they decided to invest anyway? Who on earth would invest with someone currently under investigation for a scheme to defraud investors? And if it wasn’t disclosed, why not? Did that not come up at all during due diligence?

yesbabyyes 6y ago
In this case the due diligence, while quite due, perhaps wasn't very diligent.

marcinzm 6y ago

Based on other comments, NS8 was audited by Ernst-Young and passed. So they had an expert do an audit and find no issues.

everybodyknows 6y ago
>Ernst-Young Wirecard's long-time auditor!