This document discusses the role of an effective due diligence leader. It introduces the due diligence process, which involves an initial meeting, forming an evaluation team, conducting site visits and reference calls over several weeks, preparing individual and consolidated reports, and negotiating deals. The leader ensures the team focuses on key factors like the company's value proposition and management team. Due diligence involves both objective assessment and subjective judgment, and a strong leader is needed to guide the process.

1. The Art and Science of Leading Due Diligence Catherine Chiu and Steve Lamont Keiretsu Forum Northern California

2. Objectives for This Series Help you become an effective due diligence leader

3. Objectives for This Series Help you become an effective due diligence leader Introduce you to the DD Handbook and other resources Profile role of the leader Discuss guidelines and challenges

4. First of a Four-Part Series Due Diligence Process Resources and Tools Effective DD Leadership Dealing with Challenges

5. Due Diligence is Art and Science

6. Due Diligence Focus Unique Value Proposition Sustainable Competitive Advantage / IP Cost-Effective Marketing/ Sales Plan & Capabilities Rigorous Operations Practices & Plans Appropriate Technology Implementation/ Roadmap Experienced Management Team Attractive and Complete Financial Model with Funding Plans Appropriate and Fair Deal Terms

7. Due Diligence Focus Unique Value Proposition Sustainable Competitive Advantage / IP Cost-Effective Marketing/ Sales Plan & Capabilities Rigorous Operations Practices & Plans Appropriate Technology Implementation/ Roadmap Experienced Management Team Domain expertise; functional & growth experience Talents & propensities Attractive and Complete Financial Model with Funding plans Appropriate and Fair Deal Terms

8. Weak Teams “Unravel”

9. Due Diligence Focus Unique Value Proposition Sustainable Competitive Advantage / IP Cost-Effective Marketing/ Sales Plan & Capabilities Rigorous Operations Practices & Plans Appropriate Technology Implementation/ Roadmap Experienced Management Team Attractive and Complete Financial Model and Funding Plans Appropriate and Fair Deal Terms Completeness, Thoughtfulness, Proof Points, Logical Consistency

10. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

11. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

12. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

13. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

14. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

15. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

16. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

17. Due Diligence Process “ Getting Past No” by William Ury “ Negotiating Genius” by Deepak Malhotra and Max H. Bazerman Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

18. Due Diligence Process Phase Activities Duration/Timing 1 Initial conference call or meeting/ Q&A Week 1 2 Team formation and setting communications standards Week 1 - 2 3 Site visit(s); Company & reference calls; Regular internal DD team calls Weeks 1 - 5 4 DD team reports prepared and posted Weeks 4- 7 5 Consolidated report posted, Soft circle interest determined Weeks 5 - 8 6 Deal negotiations; Term sheets distributed; Hard circle commitments made Weeks 6 - 12 7 Funds deposited; Process review with company Weeks 7 - 14

19. The Art and Science of Leading Due Diligence Catherine Chiu and Steve Lamont Keiretsu Forum Northern California