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> how they didn't do due diligence "due diligence" processes are in practice a lot less stringent or rigorous than an outsider would expect them to be given th

> how they didn't do due diligence "due diligence" processes are in practice a lot less stringent or rigorous than an outsider would expect them to be given the amount of money involved. Companies get bought based on glorified sales pitches and nobody looks too hard at what they're buying is the unfortunate truth of the matter. Investors are no better.

bcrosby95 5y ago
I think it probably depends. When we sold our company they spent months digging into numbers. And they kept asking for new types of metrics that we had to figure out ways to derive from data that wasn't necessarily designed to measure those metrics.
- SkyMarshal 5y ago
  You’re talking about selling your company, rather than raising money for a startup. At the stage where you’re selling a company, you’re expected to have sales, metrics, and various track records that can be verified, hence the intensive due diligence. And usually the acquiring company has in-house expertise on the domain, and is capable of doing the due diligence. Early stage startups have none of that, just an idea, things the team have done before as proof they can execute, and sometimes some social proof like TED talks or high-profile board members. The challenge of doing due diligence then is that most general VCs that invest across a broad range of domains lack the in-house expertise to fully vet all of them. They can hire SME advisors, or ask around in their network, and should. But it’s possible for things to slip through the cracks sometimes.
- foobarian 5y ago
  If you had sat next to Bill Clinton on a TED talk stage and had a former Secretary of State and his friends on your board I bet things would have gone more smoothly for you.
- akiselev 5y ago
  I went through a similar experience. Turns out the acquiring company knew it's audience well - all of the metrics were for sales pitches tailored to specific investors that they were raising money from, which they got shortly before finally closing our deal. Turtles all the way down.
mrweasel 5y ago
We worked with a med-tech company, as a subcontract. That company kept getting funding, investors kept pumping money in. Despite the company now being to old the justify being a startup, they had never been profitable. We happend to know one of the newer investors and asked who did technical due dilligence, because from what we could tell the primary product was just a bunch of outdated open source software glued together and general build on 15 year old tech. We got a very angry call from the CEO telling us “to mind our own fucking business”. We don’t work for them anymore.

bcrosby95 5y ago

I think it probably depends. When we sold our company they spent months digging into numbers. And they kept asking for new types of metrics that we had to figure out ways to derive from data that wasn't necessarily designed to measure those metrics.

SkyMarshal 5y ago
You’re talking about selling your company, rather than raising money for a startup. At the stage where you’re selling a company, you’re expected to have sales, metrics, and various track records that can be verified, hence the intensive due diligence. And usually the acquiring company has in-house expertise on the domain, and is capable of doing the due diligence. Early stage startups have none of that, just an idea, things the team have done before as proof they can execute, and sometimes some social proof like TED talks or high-profile board members. The challenge of doing due diligence then is that most general VCs that invest across a broad range of domains lack the in-house expertise to fully vet all of them. They can hire SME advisors, or ask around in their network, and should. But it’s possible for things to slip through the cracks sometimes.
foobarian 5y ago
If you had sat next to Bill Clinton on a TED talk stage and had a former Secretary of State and his friends on your board I bet things would have gone more smoothly for you.
akiselev 5y ago
I went through a similar experience. Turns out the acquiring company knew it's audience well - all of the metrics were for sales pitches tailored to specific investors that they were raising money from, which they got shortly before finally closing our deal. Turtles all the way down.

mrweasel 5y ago

We worked with a med-tech company, as a subcontract. That company kept getting funding, investors kept pumping money in. Despite the company now being to old the justify being a startup, they had never been profitable. We happend to know one of the newer investors and asked who did technical due dilligence, because from what we could tell the primary product was just a bunch of outdated open source software glued together and general build on 15 year old tech. We got a very angry call from the CEO telling us “to mind our own fucking business”. We don’t work for them anymore.