Making Fast Work Of Big Questions: The Value Of Due Diligence In VC
I t is no secret that venture capital is being invested in greater volume and at higher speed than ever before. Last year a record amount of VC money was committed, over €100bn, to startups in Europe and Israel. Some of these investments were done at a pace that would once have been unimaginable: the French NFT platform Sorare, which raised a European record $680m Series B round last September, received a termsheet from one investor within 48 hours of first meeting them.
A company in our portfolio similarly signed a termsheet for a $50m round just 6 days after meeting the new investor. For startups with a good story to tell, capital has probably never been more freely available.
In many ways this is a positive development, promising to consign to history the days when VCs would drag their feet endlessly over investments. But there can also be a risk, and a cost, to doing business fast. That is especially true if speed comes at the expense of two key components in any investment: due diligence (DD) and a relationship built on mutual trust.
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