Private investors, Angels, venture capital funds, private equity firms and other types of investors take on a very high risk when they invest in start-ups, especially when the investment is at an early stage. Private investors and small investment firms often lack the resources and capabilities to perform an extensive due diligence of potential investments. While investment banks and large VCs are capable of examining potential investment in terms of financial and legal risks, they may not have sufficient expertise to assess the underlying technology of the startup, its real competitive advantages and the true size of the relevant market. Missunderstanding of the underlining technology or overlooking a key disadvantage of the potential investment candidate can be detrimental to the investment decision. Thus, a technologz and market due diligence is critical before any decision about an investing.
Technical and Market Due-diligence) is not intended to replace the financial and legal due diligence but to complement it. Assessing a technology startup requires experience in developing similar technologies, skills and strategic frameworks to analyze the core technology, the target market, the competitive advantage and the potential and feasibility of the business model. Investors that cannot perform such a due diligence might end up investing in the venture that initially appears attractive but in reality is hopeless.
What should a due diligence cover?
A technology and market due diligence should answer the following questions:
- What is the actual size of the relevant market size for the product or solution?
- To what extent is the need / problem that was identified a “must have” as opposed to a “nice to have”?
- To what extent does the product meets the needs of the target customers versus other solutions
- Are there clear and sustainable competitive advantages and whether there are there significant barriers to entry?
- Is the business model feasible? Is the sales forecast realistic with the given resources?
- What are the real costs and expenses needed for implementing the plan?
- To what extent is the technology ready for the market?
- To what extent is the underlying technology truly unique and a disruptive technology? Is it a core technology or a feature?
- Where is the market moving to? when will the window of opportunity close?
- Are there any additional opportunities (applications) that can be realized on the basis of the technology and what are their potential?
HitechStrategies specializes in performing thorough and objective due diligences of startup technology based companies and investments. At the end of the due diligence, the customer receives a detailed report based on validated data, including: interviews with experts, customers and key opinion leadters in the industry, extensive research and detailed analysis a clear strategic recommendations. HitechStrategies has an extensive experience in performing these type of projects for private investors, and international investment firms . We empower our customers so they can make sound and successful investment decisions.
For more information or for receiving a quote, please contact us.