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Leading Due Diligence - Session 3 - Effective DD Leadership

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The Art & Science of Leading Effective Due Diligence. Steven Lamont & Catherine Chiu

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Leading Due Diligence - Session 3 - Effective DD Leadership

  1. 1. The Art and Science of Leading Due Diligence – Effective DD Leadership – Catherine Chiu and Steve Lamont Keiretsu Forum Northern California
  2. 2. Third of a Four-Part Series <ul><li>1. Due Diligence Process </li></ul><ul><li>2. Resources and Tools </li></ul><ul><li>3. Effective DD Leadership </li></ul><ul><li>4. Dealing with Challenges </li></ul>
  3. 3. Role of a Leader <ul><li>Orchestrate & Drive the Process </li></ul><ul><ul><li>Timing / Natural “interest” cycle </li></ul></ul><ul><ul><li>Communications – company, team, interest list, GG, possibly other angel groups </li></ul></ul><ul><ul><li>Resources: completeness of expertise </li></ul></ul><ul><ul><li>Process with integrity & professionalism </li></ul></ul><ul><li>Provide Feedback to Company </li></ul><ul><li>Backfill as Needed </li></ul><ul><li>Arbitrate as Appropriate </li></ul>
  4. 4. Role of a Leader <ul><li>Orchestrate & Drive the Process </li></ul><ul><ul><li>Timing / Natural “interest” cycle </li></ul></ul><ul><ul><li>Communications – company, team, interest list, GG, possibly other angel groups </li></ul></ul><ul><ul><li>Resources: completeness of expertise </li></ul></ul><ul><ul><li>Process with integrity & professionalism </li></ul></ul><ul><li>Provide Feedback to Company </li></ul><ul><li>Backfill as Needed </li></ul><ul><li>Arbitrate as Appropriate </li></ul>Leader Has Great Influence over Outcome
  5. 5. Things to Get Right <ul><li>Sights on Overall Objective </li></ul>
  6. 6. Things to Get Right <ul><li>Sights on Overall Objective </li></ul><ul><li>Top Five Deal-Breakers / Big Bets – Then dig down a few layers </li></ul>
  7. 7. Things to Get Right <ul><li>Sights on Overall Objective </li></ul><ul><li>Top Five Deal-Breakers / Big Bets – Then dig down a few layers </li></ul><ul><li>External Validation & Facts </li></ul>
  8. 8. Get the Facts
  9. 9. Things to Get Right <ul><li>Sights on Overall Objective </li></ul><ul><li>Top Five Deal-Breakers / Big Bets – Then dig down a few layers </li></ul><ul><li>External Validation & Facts </li></ul><ul><li>Open, Participative, Professional Process </li></ul>
  10. 10. Things to Get Right <ul><li>Sights on Overall Objective </li></ul><ul><li>Top Five Deal-Breakers / Big Bets – Then dig down a few layers </li></ul><ul><li>External Validation & Facts </li></ul><ul><li>Open, Participative, Professional Process </li></ul><ul><li>Assess Management Team in Situ </li></ul>
  11. 11. Things to Get Right <ul><li>Sights on Overall Objective </li></ul><ul><li>Top Five Deal-Breakers / Big Bets – Then dig down a few layers </li></ul><ul><li>External Validation & Facts </li></ul><ul><li>Open, Participative, Professional Process </li></ul><ul><li>Assess Management Team in Situ </li></ul><ul><li>Timing: Find Natural Rhythm of the Process </li></ul>
  12. 12. Things to Get Right <ul><li>Sights on Overall Objective </li></ul><ul><li>Top Five Deal-Breakers / Big Bets – Then dig down a few layers </li></ul><ul><li>External Validation & Facts </li></ul><ul><li>Open, Participative, Professional Process </li></ul><ul><li>Assess Management Team in Situ </li></ul><ul><li>Timing: Find Natural Rhythm of the Process </li></ul><ul><li>Share Early Drafts of Reports; Provide Feedback Early </li></ul>
  13. 13. Things to Get Right <ul><li>Sights on Overall Objective </li></ul><ul><li>Top Five Deal-Breakers / Big Bets – Then dig down a few layers </li></ul><ul><li>External Validation & Facts </li></ul><ul><li>Open, Participative, Professional Process </li></ul><ul><li>Assess Management Team in Situ </li></ul><ul><li>Timing: Find Natural Rhythm of the Process </li></ul><ul><li>Share Early Drafts of Reports; Provide Feedback Early </li></ul><ul><li>Pull the Plug or Put on Hold – Decisively </li></ul>
  14. 14. Post Investment Process <ul><li>Importance of Historical Data to Keiretsu Forum, Members, and Public </li></ul><ul><li>DD Leader Reports Important for Process Refinement </li></ul><ul><ul><li>Total amount invested & list of investors </li></ul></ul><ul><ul><li>Deal valuation & other related facts </li></ul></ul><ul><ul><li>Feedback from entrepreneur about process </li></ul></ul><ul><ul><li>Process review; tools used & effectiveness (Googlegroup, Onehub, calls & meetings, etc.) </li></ul></ul><ul><li>Annual Summary Reports </li></ul><ul><ul><li>Deals funded; funding amounts; industries; liquidity events; IRR </li></ul></ul>
  15. 15. Common Questions <ul><li>How much time will it take? </li></ul><ul><li>Should I lead if I will not invest? </li></ul><ul><li>I don’t know enough about the sector, am I qualified to lead? </li></ul><ul><li>If I have an investment interest or role in the company, may I lead? </li></ul><ul><li>Why would a sane person want to lead a due diligence? </li></ul>
  16. 16. The Art and Science of Leading Due Diligence Catherine Chiu and Steve Lamont Keiretsu Forum Northern California

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