Advice for Founders on Product, Technology and AI Due Diligence

July 2022

I help VC firms evaluate alignment between how SaaS (software-a-a-service) or HaaS (hardware-as-a-service) start-ups solve their customers’ pain points with their products, align incentives on product and pricing, and how they use technology and (where applicable) AI to do so. As I review pitch decks, here’s what I look for.

First, we need to understand the goal of a pitch deck. It won't get you a check, but it may get you a meeting.

Due diligence is one such meeting, where the end goal may be either get you to the next meeting, get you to an intro, to get you to the next due diligence meeting, etc. Before I start, I find out what the (high-level) end goal is of due diligence, and work backwards from there.

Raise

  • Why are you raising money? How will the raise help you reach the end goal of a scalable product?

  • What are the steps this raise will help you achieve, to get you closer to the end goal? Connect the dots for me.

  • Does the amount of the raise accurately reflect what you’re trying to accomplish, to get you to the end goal – or next raise/exit?

Product

  • Does the product solve 1+ much needed, highly valued (out of 30+) customer pain points?

  • Does the product and pricing align incentives between start-up and its customers?

  • Does it tie-in to the current customer workflow? Or (not recommended) will customers be expected to overhaul how they currently do things to solve their problem?

  • Is the scope manageable, with focus on one product/feature at a time?

  • Do I have enough information to agree – or disagree – with you? Or will I be asking you for more information to make a more informed decision?

Technology and Infrastructure

  • Is the product scalable, such that 2/20 fee structure makes sense for it?

  • If technology is core to the business, is there a technical (co)founder/employee (even if they're part-time)?

  • If you’re showing me an architecture diagram of your future tech stack (it happens!) – are these the right tools for the job?

  • If there’s existing software/hardware infrastructure that you call out, do I have enough information to agree – or disagree – with you? Or will I be asking you for more information to make a more informed decision?

Analytics/AI

  • Is it clear how data will be accessed/created?

  • Is the analytics/AI appropriate for the stage of the product – and feasible, or is the claim to develop state-of-the-art that doesn’t exist yet with the next raise?

  • How will AI be used to help the company scale?

If the above are not objectively clear, I advise that founders address these points before recommending them to the next step in the process. Now you know what you need to improve; you got this.

You're not hearing yeses from investors and you need advice on how to align incentives, what‘s not clear or what can be improved. I'd love to support you; please feel free to schedule this flat-fee session with me.

Good luck!

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