Venture due diligence for family offices: Balancing thorough analysis with gut feel

'Gut feel' is a big part of venture investment, but that doesn’t preclude the need for thorough due diligence to assess the business fundamentals. Doing so is even more important in the current climate and particularly for those with less experience in the VC space.
venture due diligence family offices

What you need to know

  • Less competition for deals in the current economic climate means venture investors and FOs have more time to carry out due diligence. 
  • Startups don’t have the same level of trading history as larger companies, so investors must be skilled at asking the right questions.
  • The founding team is critical to startup success, so investors should spend time assessing if they have what it takes. 
  • Avoid getting caught up in startup hype. Speak to experts and do plenty of background research on the opportunity, product, and business. 
  • Due diligence should be seen as an ongoing process as you build a dialogue with interesting early-stage companies.  
  • Getting it right requires a dedicated team, along with the processes, consistency, and brand to succeed long-term.
Venture Capital Updated on January 16, 2024

For family offices investing in venture, it’s time to hold your nerve. The current reset of the global economy is bringing increasing and greater risks to the surface, as the cost of capital increases and consumer confidence takes a hit. But, even with these macro worries, there are still vintage venture deals to be had.

Despite plenty of dry powder available for venture, much of it is sitting on the sidelines as investors are distracted with issues in their existing portfolios, as well as macro headwinds. That means potentially less competition for new deals, along with more time to spend doing deeper due diligence on potential investments. Consequently, we are seeing a renewed focus on ensuring the business fundamentals are in place before deploying cash.

I always talk about the importance of gut feel in VC deals, but that doesn’t preclude the need to thoroughly assess and analyse the team, market, product, business model and KPIs – to identify any red flags while gaining conviction, comfort and understanding the prospects of the company. This is even more important for family offices, who typically may not have the experience picking deals that dedicated VC firms have.

About the Authors

Kjartan Rist

Kjartan Rist

Venture capital investing

Kjartan is a Founding Partner of Concentric, the London & Copenhagen-based venture capital firm. He helps family offices gain a better understanding of VC investments and how to allocate towards this.

Connect with Kjartan Rist

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