Angels, Venture Capitalists, private equity and other potential investors take on a tremendously high risk when investing in hi-tech startups, especially in pre-seed, seed and early stage. Venture capital and private equity funds tend to have adequate resources to analyze the business plan, financials and legal aspects for a candidate company thoroughly; but often, have little understanding of the technology and the competitive market conditions.
Investors need a way to investigate claims made by startups that are desperate for funding. Thus, it is of critical importance to conduct a Technical and Market Due-diligence.
Technical (also referred to as technology assessment) and market due diligence do not replace the conventional due diligence but rather augment it. The technical due diligence requires an intimate knowledge of the state-of-the-art in the relevant technology, as well as of technology trends, research and development management experience and market analytics skills. An investor or fund that fails to undertake a technical and market due diligence assessment, may unsuspectingly invest in a superficially attractive but ultimately non viable venture.
What is technology and due diligence?
A technology and market due diligence needs to answer the following questions:
- What is the total Addressable Market for the company’s technology and products?
- How well do the products address the market opportunity and needs versus alternative products?
- What kind of sustainable competitive advantage does the company have? What are the barriers to competition?
- Is the proposed business model applicable? What is the real (validated) projected revenue forecast?
- What are the real costs and expenses that are required?
- What are the risks in pursuing this investment?
- How ready is the technology / product?
- Is the technology truly novel and unique? Is it an enabling technology or is it self-contained?
- Will technology trends make it obsolete? If so, when?
- Are there other applications that may exist for the technology?
Research and Tools:
- Interview target company key technical and product personnel
- Assessment of the target company’s technology, product functionality and readiness product road map
- Interviews with leading industry experts such as CTOs and VPs. Product Strategy of related companies
- Coverage of available market reports and analysts
- Comprehensive competitive analysis and comparison to the target company
- Assessment of technical trends in the market
- Assessment of the willingness of potential customers to adopt the technology and purchase product
- Interviews with existing customers to validate references, product satisfaction and value proposition (benefits) of the product
- Interviews with distributors to estimate and validate revenue potential and the company’s relations with its channels
Hitech Strategies specializes in delivering thorough and unbiased technology and market assessments. Our report is based on hard data, interviews with key industry players and experts, thorough investigation and analysis, and clear recommendations. Hitech Strategies has successfully performed technical and marketing due-diligence for several local and off-shore investment funds, angels, private equity and investment banks. We empower our clients to make well-informed, successful investments.
For more information and pricing please contact us.