A few years ago, David Frankel, a managing partner at Founder Collective, described his due diligence process and offered some advice to founders. Unsurprisingly, he begins with Personal Diligence, explaining how VCs check the team members' backgrounds and assess their personalities. This step is best handled by personal communication and is not our focus right now. Besides, a small angel investor might not have a chance to chat with founders or get contact details for references.
But the next section of the article, called Market Diligence, is exactly about Avogadro One's focus. The opening paragraph says:
Personal diligence is only half the battle. Often the more challenging part is getting comfortable with a market. Part of a VC’s job is learning how to get comfortable with markets as diverse as urban transport, event ticketing and 3-D printing — all in a matter of days or weeks.
It's unreasonable to expect to become an expert in an industry in just a few days. But you need at least a basic understanding about a technology, its market and trends to make an informed investment decision. If there is no industry expert on your team (and individual investors don't have a team by definition), there is little choice but to read a lot. Avogadro One's goal is to help investors get an understanding about an industry quickly. We are not saying we will make people experts overnight. But if you know what to look for (and we will provide hints too), you will save a lot of time with our tools.
Things get easier if you have the connections and/or the budget to hire an expert, as they tend to get pretty expensive. But you probably don't want to ask them a generic question like "Hey, what do you think about X?" It's not a good use of their time and your money. Instead, it's best to be specific and ask for their opinion (and ideally proof) about specific claims, contradictions and trends. But first you need to do some homework to find these contradictions and trends. In fact, David Frankel gives this advice to entrepreneurs:
Often a VC will turn to a trusted expert in the industry to get feedback on your business. These people are typically senior in their careers and out of touch with the modern dynamics that are reshaping the market. But their opinions carry significant weight.
Assume a former CEO in your space will throw cold water on your concept. What are the 5-10 reasons they would say your company is doomed to fail? Have compelling arguments to all of them in your pitch deck. Arm your potential investor with questions that will leave their expert without clear answers and cement your status as a person “in the know.”
This advice also applies to investors who want to chat to an expert: ask specific questions. This will help you to both validate how good the expert is and get specific data points relevant to your context. Avogadro One will help you discover important facts and ask the right questions.
Closing thoughts
I found the quote about experts particularly interesting. Isn't it ironic that a VC says that a typical expert is out of touch with the current state of affairs? It is hardly surprising. Obviously those experts are not using Avogadro One! 🙂 On a more serious note, the amount of information coming out of universities, companies, media and other sources is indeed overwhelming. Keeping up to date with everything is impossible without productivity tools. Here is where Avogadro One aims to make a difference: our platform will help users organize relevant information. No one should spend hours each week scanning journals, newsletters, blogs and whatnot just to make sure they haven't missed that one article that will change the world. And it's also not fun to still miss it and read about it from newspapers the following week. Avogadro One can help you with both challenges.
Whether you are an investor, an expert, or a founder, we invite you to answer our questionnaire to help us understand your needs. And do sign up to our mailing list here.