Leading Due Diligence - Session 3 - Effective DD Leadership
- 1. The Art andScience of Leading Due Diligence – Effective DD Leadership – Catherine Chiu and Steve Lamont Keiretsu Forum Northern California
- 2. Third of aFour-Part Series 1. Due Diligence Process 2. Resources and Tools 3. Effective DD Leadership 4. Dealing with Challenges
- 3. Role of aLeader Orchestrate & Drive the Process Timing / Natural “interest” cycle Communications – company, team, interest list, GG, possibly other angel groups Resources: completeness of expertise Process with integrity & professionalism Provide Feedback to Company Backfill as Needed Arbitrate as Appropriate
- 4. Role of aLeader Orchestrate & Drive the Process Timing / Natural “interest” cycle Communications – company, team, interest list, GG, possibly other angel groups Resources: completeness of expertise Process with integrity & professionalism Provide Feedback to Company Backfill as Needed Arbitrate as Appropriate Leader Has Great Influence over Outcome
- 5. Things to GetRight Sights on Overall Objective
- 6. Things to GetRight Sights on Overall Objective Top Five Deal-Breakers / Big Bets – Then dig down a few layers
- 7. Things to GetRight Sights on Overall Objective Top Five Deal-Breakers / Big Bets – Then dig down a few layers External Validation & Facts
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- 9. Things to GetRight Sights on Overall Objective Top Five Deal-Breakers / Big Bets – Then dig down a few layers External Validation & Facts Open, Participative, Professional Process
- 10. Things to GetRight Sights on Overall Objective Top Five Deal-Breakers / Big Bets – Then dig down a few layers External Validation & Facts Open, Participative, Professional Process Assess Management Team in Situ
- 11. Things to GetRight Sights on Overall Objective Top Five Deal-Breakers / Big Bets – Then dig down a few layers External Validation & Facts Open, Participative, Professional Process Assess Management Team in Situ Timing: Find Natural Rhythm of the Process
- 12. Things to GetRight Sights on Overall Objective Top Five Deal-Breakers / Big Bets – Then dig down a few layers External Validation & Facts Open, Participative, Professional Process Assess Management Team in Situ Timing: Find Natural Rhythm of the Process Share Early Drafts of Reports; Provide Feedback Early
- 13. Things to GetRight Sights on Overall Objective Top Five Deal-Breakers / Big Bets – Then dig down a few layers External Validation & Facts Open, Participative, Professional Process Assess Management Team in Situ Timing: Find Natural Rhythm of the Process Share Early Drafts of Reports; Provide Feedback Early Pull the Plug or Put on Hold – Decisively
- 14. Post Investment ProcessImportance of Historical Data to Keiretsu Forum, Members, and Public DD Leader Reports Important for Process Refinement Total amount invested & list of investors Deal valuation & other related facts Feedback from entrepreneur about process Process review; tools used & effectiveness (Googlegroup, Onehub, calls & meetings, etc.) Annual Summary Reports Deals funded; funding amounts; industries; liquidity events; IRR
- 15. Common Questions Howmuch time will it take? Should I lead if I will not invest? I don’t know enough about the sector, am I qualified to lead? If I have an investment interest or role in the company, may I lead? Why would a sane person want to lead a due diligence?
- 16. The Art andScience of Leading Due Diligence Catherine Chiu and Steve Lamont Keiretsu Forum Northern California
Editor's Notes
- #10 SL: Make the process as open, participative, and shared as possible . Post issues and team structure. Post interim reports. Host investor conference calls. Share information along the way. Invite as many due diligence participants as you can get -- to lead a section, do a few interviews and write-ups, profile a few competitors, whatever. It is as much about people getting comfortable with the company than it is about finding the right answer .
- #11 CC: A good mgmt team can make any business sing. Ask for an org chart and resumes of everyone above Director level. This gives you a sense for the org competency, on paper. Interview key mgmt members separately. Check references!!!
- #12 CC: Assess interest list to ensure there will be enough money for the company. Begin process within 1 week of presentation. Set up one (or two) in-depth concall with CEO. Face-to-face for a mgmt interview session. Possibly an overview session. Sign people up for various parts of DD after one in-depth concall. Sometimes the CEO gets very busy or distracted in running the company. We should be understanding, but also remind them that timeliness = capital. Backfill if team is small.
- #13 SL: Share drafts of reports, questions, concerns, etc. early and often with the entrepreneur. Avoid surprises . Give them a chance to do a rebuttal or share other perspectives.
- #14 CC: Pull the plug on the dd process or put it on hold if you need to. When the business plan morphs or some key piece is missing, it is sometimes better for the company to regroup and live to fight another day, than to try to push through the current round. Same is true if there is insufficient interest due to perceived risks. It is best to be honest and upfront with the entrepreneur so he/she avoids wasting time
- #15 SL: CC: A new form is being put together as we speak, where the you, the DD leader, will be asked to fill out some info about the deal that just went down, if funding actually takes place. The purpose is to track the terms of the K4 deals, so that we can have a “market view” of valuation, typical terms, etc. The summary info from these reports will be made, on a confidential basis, to DD leaders so that we can all get smart about what terms to ask for, what things to watch out for, etc.
- #17 SL: Welcome to the Keiretsu Forum Series on leading Due Diligence for Angel Investments, called The Art and Science of Leading Due Diligence.