Networked Due Diligence: How Founders, VCs, and LPs All Win from DD

Millian Gehrer
Aug 31, 2018 · 3 min read

tl;dr: NDD = collaborative DD — we leverage our network to introduce founders to valuable connections and leads before making an investment decision.

Most venture funds’ due diligence (DD) is quite similar in structure: initial call, second meeting, partner meeting, and a session in IC (investment committee). While founders may glean some feedback or new perspectives throughout, it can often feel as though the process is a one-way street: VCs demand a lot of information while providing little in return.

As a fund backed by 30 unicorn founders and run by former entrepreneurs and operators, firstminute strives to support the founders we encounter whenever we can. We’re aware DD can be tedious for founders, so we’re keen to ensure our process drives value for all parties involved. We feel so strongly about it we’ve even coined our own term: networked due diligence (NDD).

Through NDD, we aim to provide founders a taste of the unfair advantage firstminute can provide. In short, if we end up getting in serious talks with a startup, we will often tap into our network of corporates and successful entrepreneurs to introduce them to valuable connections, leads, and potential partners. Based on these conversations, we propel founders forward on their mission, accelerating their sales cycles and fundraising. We also learn how quickly they convert potential customers while engaging our LP base.

How NDD Works @ firstminute

NDD starts with careful consideration of who within our wider network would be a great fit for the startup we’re looking at to have a conversation with — in fact, we often ask the founders for a wish list to help guide our thinking here.

When brainstorming contacts, we think of our LP base (which comprises 30 unicorn founders and institutional heavyweights such as Atomico, Tencent, and Henkel), our superstar portfolio founders, and tier 1 (angel) investors. We also draw on our ecosystem, which amongst others includes the invite-only Founders Forum, the incubator/accelerator Founders Factory (backed by Aviva, CSC easyJet, the Guardian, Holtzbrinck, L’Oréal, and M&S), and digital consultancy Founders Intelligence (whose clients include Unilever, Tesco, and Visa).

Once we’ve compiled a compelling list, we facilitate high-level introductions between the startups and relevant potential investors, advisors, and corporates. Importantly, we will only tap into our network where we believe that an introduction drives value for both parties. This paves the way for conversations exploring synergies: Founders often emerge from these with a new pilot, client, or value-add investor (or better yet, a combination of all of the above). Moreover, actively opening new avenues for growth combats the stagnation many startups face during fundraising.

Sometimes, we’ll join in conversation with all parties, and other times we’ll let founders and partners discuss directly. Either way, NDD adds a new dimension to our own investment process too. The feedback we receive helps gauge market appetite, provides a sector-specific perspective on the business, and shows us how founders interact with possible clients. This additional validation from our trusted experts helps us do our job better and (hopefully!) pick the winners with higher accuracy.

Most importantly, by fostering a conversation between entrepreneurs and our wider network, we can support founders whether we end up investing or not. Enabled by our positioning at the intersection of our founder-heavy investor base and the wider Founders Forum group, we hope NDD makes the due diligence process a win-win for all parties involved.

Want to learn more about firstminute? Check out our site or this TechCrunch article.

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Millian Gehrer is a Summer Associate at firstminute, and a rising junior at Princeton, where he’s completing his B.S.E. in Operations Research and Financial Engineering.

firstminute capital

Thoughts from the team at firstminute capital - an early-stage venture fund in London.

princeton ‘20

Thoughts from the team at firstminute capital - an early-stage venture fund in London.

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