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Startup due diligence: Some considerations

We had an interesting week with the Qatar Science and Technology Park (QSTP) that had invited several high-profile entrepreneurs from the US to evaluate the technologies of Qatar Computing Research Institute (QCRI).

Unfortunately, I wasn’t able to attend all the sessions, but from what I saw I picked up a few pointers for due diligence work done by investors when evaluating the startups. Here they are:

  • customer references => who are the existing customers and what do they say?
  • investor references => who are the existing investors and what do they say?
  • competitors => feature comparison & position map
  • technology => expert evaluation
  • IPR => defensibility of the core tech
  • key competitive advantage => if not the core tech, then what is the thing preventing others from replicating your success?

Conclusion

It’s worthwhile to mention that the formal due diligence process is something different from an informal one – the latter takes place when the investor does some initial inquiries about the team and the tech, and then decides whether he wants to pursue further discussions. After reaching an adequate level of confidence, formal and detailed due diligence procedures conducted with the help of experts (e.g., tech, legal, science) ensue.

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