People often ask me about how I evaluate a potential seed investment. While assessing a young business accurately can be something of an intuitive art, I have a handful of questions that I rely on in the diligence process. I have shared them via email many times and, since I often tell my portfolio companies that things you say over and over via email are actually blog content, I’m taking my own advice. In this and the next five posts, I’ll be writing about my go-to questions and why I think they are so powerful.
Matt Crespi, my brilliant TA and co-instructor for my new Corporate Lab Startup course, reminded me that McKinsey & Company publishes an interview guide for potential hires. The idea is that they want to evaluate how you perform when prepared for a situation. They argue that since they wouldn’t send you into a client engagement unprepared, they don’t want to interview you if you haven’t prepared either. (I’ll pass on all of the obvious consulting jokes here.)
McKinsey and I have something in common. My questions are not “trick” questions meant to catch a founder off-guard. They are instead designed to get at the heart of how a founder thinks about his or her business and help determine whether Birchmere is a good fit for them.
Questions aside, the most important thing at the end of the diligence process is our impression of the founder(s). It only makes sense that we would want them to be as prepared as possible for our conversation.
As for the questions themselves, they have and will continue to evolve over time. Right now, here are the five questions I ask most frequently in early diligence: (links go to posts that expand on each)
1. If your business succeeds, what does the world look like in 3–5 years?
4. If you are successful, what is your unfair competitive advantage?
Over the next few weeks, I will publish a separate Medium post discussing in detail each of these questions and how they relate to our overall strategy at Birchmere. Follow along by following me on Medium.
