Your Offensive Line Your Offensive Weapon Care and diligence bring luck Thomas Fuller Why Due Diligence is Important Returns are positively correlated to hours spent on due diligence What is the right amount of due diligence ID: 265235
Download Presentation The PPT/PDF document "Due Diligence" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Due Diligence
Your Offensive Line, Your Offensive WeaponSlide2
Care and diligence bring luck
. Thomas Fuller
Slide3
Why Due Diligence is Important
Returns are positively correlated to hours spent on due diligenceSlide4
What is the right amount of due diligence?
Due Diligence Sweet Spot ~ 40 hours
Not an exact science and depends on the dealMore doesn’t correlate to higher returnsDiminishing returns after initial threshold metNeed to be intentional and deliberate when you perform due diligence – in other words:
Know what you are looking for and where to look for it.Slide5
Due Diligence ProcessSlide6Slide7
Due Diligence
Phase I
Slide8
Due Diligence
Phase II
Slide9
Due Diligence Product/Service
Features versus benefitsWhat is the pain being solved?
How does the product/service’s benefits relieve that pain? Current product/service alternatives?IP potential?Slide10
Micro-Market Analysis
What benefits does the offering provide that other solutions don’t?Slide11
Micro-Market Analysis
What customer pain will the offering resolve?
How strong of an incentive do customers have to give you their money? Evidence?
Will customers purchase at a price that works for the business model?
Slide12
Micro-Market Analysis
What evidence can you provide to show that your target market has the potential to grow?
Are there other segments that could benefit from a related offering? How do they benefit?Can you develop capabilities that are transferable from one segment to another?Slide13
Micro-Market Analysis
How attractive is the micro-market?Fit market into one of three buckets:
AttractiveFairly attractiveNot attractiveSlide14
Macro-Market AnalysisSlide15
Macro-Market Analysis
How attractive is the Macro-Market?
Fit market into one of three buckets:AttractiveFairly attractiveNot attractiveSlide16
Industry Analysis
Porter’s Five ForcesSlide17
Industry Analysis
Blue Ocean or Bloody Ocean
“
Blue oceans
….denote
all the industries not in existence today – the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid
.”
Bloody Oceans –
industry characteristics where companies fight and primarily compete on price.Slide18
Industry Analysis
How attractive is the Industry?
Fit industry into one of three buckets:AttractiveFairly attractiveNot attractiveSlide19
Management Team
Execution Risk
Does the management team have the relevant experience necessary to execute the business plan?Industry Skills?Technical Skills?Transferable Skills?
Passion?Slide20
Management Analysis
How attractive is the Management Team?
Fit into one of three buckets:AttractiveFairly attractiveNot attractiveSlide21
Financial Analysis
What is the company’s revenue Model
Are the revenue projections realistic?Has the founders included the details on ‘how’ they plan on achieving these projections?Gross, operational and net margins?Sources and uses of funds?
Projections
Management, downside and upside scenarios?
ROI for investors?Slide22
Financial Analysis
How attractive are the financial terms?
Fit into one of three buckets:AttractiveFairly attractiveNot attractiveSlide23
Risk Assessment
Industry RiskChanges to Porter’s Five Forces
Market (Product/Service) RiskChanges in customer preferenceFinancial RiskAppropriateness of fund sources and uses
Execution Risk
Management team execution abilitySlide24
Due Diligence Checklist
- AttachmentSlide25
Efficient Due Diligence
How can you work with others to share in due diligence tasks?
Angel groups/forumsDeal flowCollaborationLeverage investor specialties/experience Lead investor strategy
Due diligence delegation based on specialtiesSlide26
Q&A
Ryan Goral
www.separtners-llc.com
Twitter: @
ryangoral