due diligence

4 posts

The Mysterious “Due Diligence” Process

World Affairs Business & FinanceBy MartinZwilling

3 months ago

After you have successfully attracted angels or venture capital with your business case, your million dollar product idea, and you have a signed term sheet, there is still one more hurdle to overcome before investors write the check. This is the dreaded “due diligence” process.

For no good reason, this process seems shrouded in mystery, when in fact it is nothing more than a final integrity check on all aspects of your business model, team, product, customers, and plan. In my view, understanding due diligence can only improve information flow, and leads to a better long-term partnership with your investor.

Remember that up to this point, the investor has primarily seen and talked to the founder and CEO, and studied written documents. Before smart investors write a check, they, or a trusted consultant, will want to meet and talk with your key team members, several customers, and evaluate the real product. If results don’t match what they have been told, all bets are off.

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The Pitfalls of Cloud Computing

Technology InternetBy Maskil

4 months ago

Image representing FriendFeed as depicted in C...

Image via CrunchBase

Cloud Computing, Cloud Services, Web Services, Web 2.0. Each has its own definition, overlapping with the others to a greater or lesser extent. What it means to the man on the street (or on his or her laptop or mobile), though, is that we’re increasing trusting our valuable (to us, at least) information to a service somewhere out there on the Internet.

For some, this could mean just a webmail account with Gmail or Hotmail and profiles with Facebook and Flickr. For Web Workers (e.g. bloggers and freelancers) it could mean a whole lot more (accounting records, archives, contacts, work in progress, etc.).

Sometimes we get a none too gentle reminder about the risks of Cloud Computing.

To put things in very simplistic terms, the risks are two:

Risk of inaccessibility. (You don’t have access to your data.)
Risk of inappropriate accessibility. (The wrong people have access to your data.)

Either of these risks could be the result of human error or a hardware or software failure at the service provider. Data shops are usually pretty good at handling such outages, however. It’s far more likely that problems will result from your Web 2.0 service having a nasty brush with Economy 1.0.

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All Great Ideas Don’t Make Great Startups

World Affairs Business & FinanceBy MartinZwilling

7 months ago

I have a certain friend who called me again a while back, all excited about his latest revelation. “What if you could go to a web site and find all the recipes you could make today, with just the ingredients you already have in your kitchen? I’m going to start a website to offer this service!”

I’m sure you all realize that there could be quite a distance between a great idea and a great startup. But many people don’t have a clue on how to bridge the gap. So, trying carefully not to rain on his parade, I suggested to my friend that he complete the following analysis as due diligence on the idea before spending his life savings (and others) to roll out a solution:

Few competitors. Use Google or one of the many other search engines to search for existing solutions to this problem. A search argument like “recipes from the ingredients you have on hand” might be the place to start. If you find ten competitors who already have this offering, it’s probably not worth going any further.

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Startups: How to Survive Due Diligence

World Affairs Business & FinanceBy MartinZwilling

9 months ago

If your startup is great enough to get a term sheet from angel investors or a venture capitalist, the next step for the investor is to complete the mysterious due diligence process. One objective of this process is to verify that the business plan is current and complete. Probably more important, and more subjective, is the evaluation of the management team and culture of the organization.

Some startups do nothing to prepare for the due diligence process, assuming the people and business plan documents will speak for themselves. Others stage elaborate “training” sessions, to “assure” that everyone tells the same story. The right answer is somewhere in between.

First, it helps to know the priorities and steps normally associated with the due diligence process:

Evaluation of key players. This is the highest priority item. As a starting point, an investor will ask for resumes of the “key players,” and will then follow-up to verify that executives are experienced, honest, and committed. That means questioning each of these key players, and calling references or prior associates.

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