Due Diligence

Due diligence is the formal term for the process by which we screen and select options. It’s organized around a set of criteria that can be applied to technology investment decisions of all kinds. The investment targets include everything from software applications, personal computers (PCs), laptop computers, cell phones, personal digital assistants (PDAs), communications hardware and software, data, security and technology services. The lenses used to vet investment opportunities and challenges are organized around the specific requirements that all technology investors – especially including CIOs, VCs and technology vendors – need to satisfy in order to achieve their objectives. There’s also a difference among the targets of due diligence. Technology comes in multiple flavors: hardware, software and services. The evaluation of each of these flavors requires a different perspective (in addition to the different perspectives that arise from the source and object of the technology investment).

Finally, there are differences in the impact the technology is expected to have. Private equity venture capitalists want to make as much money as they can – as quickly as they can – for their general and limited partners. CIOs want to improve operating efficiencies while contributing to the growth and profitability of the business. Technology vendors want to discover and build the next “killer app” so they can capture more market share.

There are differences among the due diligence that occurs within a company to acquire or deploy technology, investors seeking a return on their technology investment, and companies trying to develop technology products and services for sale to existing and new customers. It’s not that the evaluation criteria are different; in fact, they’re amazingly similar. The differences can be found in how the criteria are weighted and analyzed.

We assist in the organization and execution of due diligence according to a set of criteria we’ve developed and a methodology we’ve perfected.

Here are fifteen criteria that apply to all technology investments – regardless of where you sit or the nature of the deal:

1. Products and services that are on the right technology/market trends trajectory products and services that have the right infrastructure story
2. Products and services that sell clearly into budget cycles and budget lines
3. Products and services whose impact is quantitative
4. Products and services that do not require fundamental changes in how people behave or major changes in organizational or corporate culture
5. Products and services that, whenever possible, represent total, end-to-end "solutions"
6. Products and services should have multiple "default" exits
7. Products, services and companies that have clear horizontal and vertical strategies
8. Products and services that have high industry awareness recognition
9. Products, services and companies that have the right technology development, marketing and channel alliances and partnerships
10. Products and services that are "politically correct"
11. Serious people recruitment and retention strategies should be in place
12. Products and services that have compelling "differentiation" stories
13. Company executives that have wide and deep experience
14. Products and services companies that have persuasive products/services "packaging" and communications

These fifteen clusters of questions and issues constitute the framework we use to examine technology investments of all kinds on behalf of a variety of clients. Criteria are scored and weighted to provide greater insight into the prudence of specific technology investment opportunities.