Carmen Ventures

Diligence is not a weapon “Diligence” is a term that can strike fear in an entrepreneur, whether they are experienced or a novice. From our perspective - it should not be the case. Everyone uses diligence - every day. Virtually any time someone performs an internet search - they are researching something to learn more. More about what to buy, where to eat, when to vacation, who to date, and who to hire…among millions of other reason. All are a form of diligence. Trying to increase your knowledge and gain perspectives to make an informed decision. Why then does diligence have to scare so many entrepreneurs? What are they worried that their prospective investor will find out? Diligence is not just a way for a prospective investor to find a way to say “no”. We view diligence as a systematic process that benefits both the investor AND the entrepreneur seeking funding. Diligence should be deep. Very deep. From all relevant angles. Technical diligence has to be comprehensive. If a company or technology does not work, scale, perform in ways that matter, perform better than existing alternatives, and in some cases, simply comply with the laws of physics and chemistry - there is no reason to invest. Invest is not just the people with money. It applies even more to the people pursuing the venture. Why would anyone want to spend valuable and irreplaceable time on something that just won’t work? Diligence has two simple goals: 1 - Is the idea, company, venture, entrepreneur a viable investment according to the fund’s investment thesis? The last part is key - it may be viable investment, but not for a variety of reasons that are specific to the fund at that time. (that is a subject for another post) 2 - Determine the time, money, and talent that needs to be deployed to HELP the startup be successful. The second point is critical. When an investment is made - it should include time and talent from the fund to truly assist in advancing the startup. Mentoring, fractional subject matter experts, lab access, connections, sales opportunities - there are many ways a fund can help. Actually - should help. Without thorough diligence - how can a fund know if and where they can help once an investment is made? This is not gambling - it is investment. So next time an investor talks about “putting you in diligence”… remember - it should be a diagnostic procedure not an autopsy.