21Due Diligence Cheat Sheet
The only measure of venture capital success is performance. The ability to pick the right companies that generate superior returns is paramount to any professional's success in this business.
The investment process — sourcing, due diligence, negotiation of investment terms, board roles, and supporting entrepreneurs — is important, yet secondary. Investors primarily care about strong financial returns. While sourcing investment opportunities is a function of the firm's team expertise and relationships, the venture firm's brand as being entrepreneur friendly has also become an important factor. Investors, who are independent and act decisively, are responsive and treat entrepreneurs as equals attract strong opportunities. Eventually, a strong brand is built on this foundation.
When it comes to due diligence, seasoned investors are students of the market; they make quick decisions and actively invest in opportunities that serve the market needs. Management team, product, features, and competition are important attributes, yet the best investors rarely overthink and are comfortable in ambiguity.
These five general criteria determine investment decisions:
- Does the management team demonstrate integrity, a sense of urgency, knowledge, and agility?
- Is a clear market pain point identified? Has a value proposition been established?
Exhibit 21.1 Due Diligence — Key Criteria.
Criteria Definition Remarks Management Team Criteria Management team ...
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