Downturn Raises Priority of Technical Due Diligence
“This Wall Street meltdown is having effects on early-stage green-tech companies getting the money they need to grow. There was a huge due diligence process, with outside scientists, as we looked for money, which they probably wouldn’t have done before.”
That quote from Jonathan Gorman, Manager of Business Development at Qteros, an alternative energy start-up (originally quoted on CNET.com).
We’ve started to come across this a lot in past few months; investors are giving more priority to technical due diligence in the current climate.
It’s largely down to the recession-time trend of venture capitalists taking fewer, larger punts on companies they’re more sure of. It makes sense that they look to increased tech due diligence to provide greater certainty on the few investments they do make.
Perhaps the introduction of more stringent pre-investment analysis is a silver lining of the current crisis that will reap future rewards. As hardened advocates of the importance of technical due diligence in any climate, we’re a little alarmed by the line “which they probably wouldn’t have done before” though!