Passing VC Due Diligence Without Meeting In Person

A lack of in-person meetings is forcing investors to intensify due diligence processes and create new means of building trust with prospective portfolio founders. Olivia Lew, Investor at General Catalyst, and Gaurav Tuli, Partner at F-Prime Capital, shared how their respective funds have adjusted and how founders can best prepare themselves for new due diligence methodology.

Key Takeaways

• The basis of the VC industry is based on trust. Between entrepreneurs and their team. Between entrepreneurs and investors. Since trust is built on building a relationship, this has really changed the due diligence game and higher the bar given the new environment.
• Olivia and Gaurav are spending more time on scenario planning (what could go right and what could go wrong). It isn't more rigorous but the orientation of questions has shifted.
• Generally, VCs are completing more reference calls to help build the picture of the team and increase the bar.
• Offer to have your investors meet additional members of the team to get a better feel for the culture fit during the due diligence process. This helps investors get a better handle on the following: Does everyone on the team understand the vision, mission, and values? Does everyone have the depth of expertise with their respective responsibilities?
• When meeting members of a team, Olivia and Gaurav noticed a shift to one-on-one Zoom meetings. Previously, they met team members in a group when they could meet in person.
• With virtual dinners and happy hours during the due diligence process, it all comes down to sharing vulnerabilities, life stories, and being transparent. Treat virtual events as an opportunity to build trust and add the human component.
• For venture capitalists, the COVID-19 time period has shown how startup leaders react to adversity and tough situations.
• Founders should complete their own due diligence process on their potential investors. Two-way diligence is key!
• With Zoom meetings, we lose body language queues which helps with the diligence process. The silver lining is that we also lose a lot of the physical biases - where people sit, their physical appearances, and more.

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Thank you Olivia & Gaurav for taking time out of your day to share your expertise with the greater Venture Lane community!