http://ocvcblog.com/2007/11/06/arbiters-of-risk/% Just a VC in The OC thinking out loud Sun, 05 Feb 2012 06:14:40 +0000 http://wordpress.org/?v=2.2.2 http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-276 Due Diligence Revisited | OC VC Mon, 04 May 2009 19:58:55 +0000 http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-276 [...] Most VCs generally break this down to 1) market; 2) technology; 3) financial; and 4) “operations”. Performing due diligence on a particular market should result in the VC being very familiar (and comfortable) with the size of the market(s) the particular company is targeting with its product(s)/service(s), the direction the market seems to be heading based on historical statistics and the forecast rate of growth (e.g., most funds don’t necessarily like investing in markets that are dying…), the typical sales cycles for the product(s)/serivice(s), and who the players are in a given market (i.e., both the real and potential competition). Technical due diligence depends on what is being offered for sale by the company and whether their success depends on any particular competitive technological advantage (i.e. intellectual property). During technical due diligence, VCs attempt to determine the defensibility of the company’s business, any differentiation, whether the company will have the necessary freedom to operate (i.e., potential patent infringement issues), and any product life-cycle issues. Financial due diligence is essentially two parts: one part is determining how much capital the company will require and whether that fits with the fund’s model and the other part has to do with analyzing the company’s financials (e.g., how much cash they have, their cap table, whether they have any debt, etc.). A part of financial due diligence may also involve determining whether the VC and/or company will be able to pull together a syndicate for larger and/or later rounds of financing. Finally, performing “operational” due diligence involves background checks on the folks involved to determine whether they are the right folks to be able to take the company to the next level based on their past experience and personal characteristics. Operational due diligence also involves making sure the business model is sound, the company doesn’t have any pending or potential legal issues, and the that the general logistics of making the investment make sense. The entire due diligence exercise serves, at a minimum, to identify and mitigate the risks associated with the deal to the extent necessary honor the VC’s fiduciary duties to its LPs. For more information about the types of risks VCs attempt to identify/mitigate, see my Arbiters of Risk post by clicking here. [...] […] Most VCs generally break this down to 1) market; 2) technology; 3) financial; and 4) “operations”. Performing due diligence on a particular market should result in the VC being very familiar (and comfortable) with the size of the market(s) the particular company is targeting with its product(s)/service(s), the direction the market seems to be heading based on historical statistics and the forecast rate of growth (e.g., most funds don’t necessarily like investing in markets that are dying…), the typical sales cycles for the product(s)/serivice(s), and who the players are in a given market (i.e., both the real and potential competition). Technical due diligence depends on what is being offered for sale by the company and whether their success depends on any particular competitive technological advantage (i.e. intellectual property). During technical due diligence, VCs attempt to determine the defensibility of the company’s business, any differentiation, whether the company will have the necessary freedom to operate (i.e., potential patent infringement issues), and any product life-cycle issues. Financial due diligence is essentially two parts: one part is determining how much capital the company will require and whether that fits with the fund’s model and the other part has to do with analyzing the company’s financials (e.g., how much cash they have, their cap table, whether they have any debt, etc.). A part of financial due diligence may also involve determining whether the VC and/or company will be able to pull together a syndicate for larger and/or later rounds of financing. Finally, performing “operational” due diligence involves background checks on the folks involved to determine whether they are the right folks to be able to take the company to the next level based on their past experience and personal characteristics. Operational due diligence also involves making sure the business model is sound, the company doesn’t have any pending or potential legal issues, and the that the general logistics of making the investment make sense. The entire due diligence exercise serves, at a minimum, to identify and mitigate the risks associated with the deal to the extent necessary honor the VC’s fiduciary duties to its LPs. For more information about the types of risks VCs attempt to identify/mitigate, see my Arbiters of Risk post by clicking here. […]

]]> http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-250 Venture Capital Safe Haven | OC VC Tue, 30 Sep 2008 19:41:58 +0000 http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-250 [...] Our risk is not systemic risk; it is typically understood prior to making an investment (see Arbiters of Risk).  While many venture backed companies fail, the simple structure of venture investing – cash [...] […] Our risk is not systemic risk; it is typically understood prior to making an investment (see Arbiters of Risk).  While many venture backed companies fail, the simple structure of venture investing – cash […]

]]> http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-236 Hope is Not a Strategy | OC VC Tue, 10 Jun 2008 17:37:57 +0000 http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-236 [...] Risk. You can read my previous post on risk, Arbiters of Risk, for more information but it suffices to say that we VCs are “risk masters” and attempt [...] […] Risk. You can read my previous post on risk, Arbiters of Risk, for more information but it suffices to say that we VCs are “risk masters” and attempt […]

]]> http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-171 Due Diligence | OC VC Wed, 23 Jan 2008 05:02:58 +0000 http://ocvcblog.com/2007/11/06/arbiters-of-risk/%#comment-171 [...] Most VCs generally break this down to 1) market; 2) technology; 3) financial; and 4) “operations”. Performing due diligence on a particular market should result in the VC being very familiar (and comfortable) with the size of the market(s) the particular company is targeting with its product(s)/service(s), the direction the market seems to be heading based on historical statistics and the forecast rate of growth (e.g., most funds don’t necessarily like investing in markets that are dying…), the typical sales cycles for the product(s)/serivice(s), and who the players are in a given market (i.e., both the real and potential competition). Technical due diligence depends on what is being offered for sale by the company and whether their success depends on any particular competitive technological advantage (i.e. intellectual property). During technical due diligence, VCs attempt to determine the defensibility of the company’s business, any differentiation, whether the company will have the necessary freedom to operate (i.e., potential patent infringement issues), and any product life-cycle issues. Financial due diligence is essentially two parts: one part is determining how much capital the company will require and whether that fits with the fund’s model and the other part has to do with analyzing the company’s financials (e.g., how much cash they have, their cap table, whether they have any debt, etc.). A part of financial due diligence may also involve determining whether the VC and/or company will be able to pull together a syndicate for larger and/or later rounds of financing. Finally, performing “operational” due diligence involves background checks on the folks involved to determine whether they are the right folks to be able to take the company to the next level based on their past experience and personal characteristics. Operational due diligence also involves making sure the business model is sound, the company doesn’t have any pending or potential legal issues, and the that the general logistics of making the investment make sense. The entire due diligence exercise serves, at a minimum, to identify and mitigate the risks associated with the deal to the extent necessary honor the VC’s fiduciary duties to its LPs. For more information about the types of risks VCs attempt to identify/mitigate, see my Arbiters of Risk post by clicking here. [...] […] Most VCs generally break this down to 1) market; 2) technology; 3) financial; and 4) “operations”. Performing due diligence on a particular market should result in the VC being very familiar (and comfortable) with the size of the market(s) the particular company is targeting with its product(s)/service(s), the direction the market seems to be heading based on historical statistics and the forecast rate of growth (e.g., most funds don’t necessarily like investing in markets that are dying…), the typical sales cycles for the product(s)/serivice(s), and who the players are in a given market (i.e., both the real and potential competition). Technical due diligence depends on what is being offered for sale by the company and whether their success depends on any particular competitive technological advantage (i.e. intellectual property). During technical due diligence, VCs attempt to determine the defensibility of the company’s business, any differentiation, whether the company will have the necessary freedom to operate (i.e., potential patent infringement issues), and any product life-cycle issues. Financial due diligence is essentially two parts: one part is determining how much capital the company will require and whether that fits with the fund’s model and the other part has to do with analyzing the company’s financials (e.g., how much cash they have, their cap table, whether they have any debt, etc.). A part of financial due diligence may also involve determining whether the VC and/or company will be able to pull together a syndicate for larger and/or later rounds of financing. Finally, performing “operational” due diligence involves background checks on the folks involved to determine whether they are the right folks to be able to take the company to the next level based on their past experience and personal characteristics. Operational due diligence also involves making sure the business model is sound, the company doesn’t have any pending or potential legal issues, and the that the general logistics of making the investment make sense. The entire due diligence exercise serves, at a minimum, to identify and mitigate the risks associated with the deal to the extent necessary honor the VC’s fiduciary duties to its LPs. For more information about the types of risks VCs attempt to identify/mitigate, see my Arbiters of Risk post by clicking here. […]

]]>