Rockies Venture Club recently launched a beta program for due diligence analytics, assembling a team of highly capable industry and academic individuals in order to streamline the time consuming process and assist angel investors with making the most informed decisions possible. This is an extremely exciting prospect because research shows that extensively researching a company at the onset of a deal pays off for angel investors.
In fact when looking at exits, the investors that preform a high amount of due diligence were able to exit with an average multiplier of 5.9x in 4.1 years, whereas investors preforming low amounts of diligence exited at an average 1.1x multiplier in 3.4 years. That is a huge difference! Additionally, a study published by Robert Wiltbank (Willamette University) found that investors who performed more than 40 hours of due diligence experienced a 7.1x multiple whereas their 20 hour counterparts only experienced a 1.1x multiplier. While this isn’t an exact science, 40 hours is usually where the returns for additional research begin to taper off. The question then becomes who has time to perform all of this due diligence? That is where the RVC collective approach comes in.
The experience of the inaugural due diligence team covers a large number of industries. These include: software technologies, patent law, asset management, startup management, and financial analysis. With this highly qualified team taking on the brunt of the due diligence work, angel investors can be given an increased degree of confidence before starting their own due diligence process.
The due diligence team addresses a classic challenge for angel groups nation-wide. Angels need a lead investor to guide the due diligence process and ask the critical questions needed to determine which companies are likely to succeed and which will join the ranks of the “walking-dead” or worse! The RVC due diligence team facilitates the due diligence team in a consistent and professional manner while allowing angels to use this data as a part of their personal decision making resource pool – with the goal of achieving smarter and more profitable investments for all.
RVC is extremely excited to work with this team and hopes that streamlining the due diligence process will increase an angel investors’ likelihood of making smart investments, and help more of the top Colorado entrepreneurs get their companies funded.
By: Ian McConville
Ian has recently started working with RVC as the communications and event manager. He recently graduated from Lehigh University with a degree in Mechanical Engineering. He loves learning about the business and technology behind the many great startups that come through RVC.