Manage your deal flow management in legal agreements effectively

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okay so hi everyone um I'm Katie Swanson and I am the founder of oxen Labs uh basically just a community to help people in the investment space uh figure out you know what their thesis might be where they want to invest and how to get there um and then also network with other people who are also investing um in different areas similar areas uh and just you know help people on their investment Journey so with that being said uh I would love to introduce Candace she is our amazing board member right now and um she has incredible experience um I was when I first met her I was like I need her in this group um I need her to help support um all the people that I'm supporting as well because her knowledge goes above and beyond my knowledge uh especially within the areas of deal flow management and um due diligence best practices so with that Candace I'll let you uh introduce yourself and and take it from there yeah thanks Katie I'll uh I'll share a couple slides real quick with you guys um you should be able to see this so yeah thank you so much Katie for having me thrilled to join you all as uh Katie shared I'm Candace ranian the founder of legible VC today we're going to talk about deal flow due diligence Pro tips but probably relevant you know why am I qualified to talk on this topic um a little a little backstory so um in finding and building legible VC as the the CEO I really went on in this mission after 10 years of experience as an investor working across various asset classes working with idea to grow stage pre-ipo companies that um there are a lot of aspects of venture operations both front office and back office that are still broken and there's lots of room for growth so um after working in a handful of firms um being you know only able to positively impact One Fund or one firm at a time I'm a builder I got frustrated and bored and you know I'd fix the things I was like okay I'm ready to move on and do something else so um moving into managing Consulting and launching legible made a lot of sense so that I could take all the practices that I've developed in you know a decade as an investor to roll them into a digital product Suite so I recently launched the legible Library it's a platform of about 30 proven playbooks to do front office back office Ops I'm really leaning on front office uh deal flow due diligence part of why I'm here today to talk to you guys um in my Consulting Journey the last few years I've supported a number of EC firms some of them here Illustrated but uh as it pertains to the topic today I've in the course of my career I've sourced and evaluated more than 20,000 startups globally across many various sectors I've invested across nearly every vertical uh in the industry of venture and startup investing and at one time in my career was managing a pipeline of about 10,000 companies in a 14-month period while also managing 20 Associates so kind of been there done that as far as like building and scaling teams from scratch I've raised multiple Venture funds um my bread and butter is institutional I've gotten really strong in the background of raising from institutional firms um I also do direct and indirect investing personally um at an adviser to many funds and of my own family um so lots uh lots of time has brought me to this point to to meet with you all the day and share as many gems and nuggets as I can today and and really happy to do that um with that would love to hop into um an opportunity for you guys and thank you so far um I know is it cie is that how you pronounce your name or did I butcher that it's all good Kaye oh okay Kaye um I always feel bad because people butcher my name so sorry to do that to you Kaye um I already have a couple questions from Kaye but if you all have any other questions feel free to drop them in the zoom chat Katie is going to monitor that hopefully some of the topics I'm covering today we'll address some of those but if not happy to break away from uh this presentation and address any questions and I probably won't share my screen the whole time I have a couple visuals if you're more of a visual learner but um we'll bounce back and forth for you guys all right so I have these six topics these are topics we like already published you guys um if anybody wants to touch on a particular topic first like you see these and you're like H let's let's cover this one now let me know we'll do it Jeopardy style and I'll Dive Right In so if you see a number one through six jump out at you Katie if you want to watch the chat box otherwise I'll Dive Right In yeah absolutely I'll keep my eye on the chat I don't see any numbers popping up immediately um so maybe we can just jump in and then um as it goes then if anyone has recommendations as to what's next then I'll keep an eye on that sweet okay so I'll start from the top so um obviously we're discussing deal flow management and due diligence these are you know Two Worlds that Collide um and there we had a couple questions already around like the efficiency of due diligence and how to carry it out effectively everything from you know it's a top- down approach we always talk about the funnel like fill the funnel fill the funnel um but I think it's really important as any investor if you're a fund manager at the top of the GP level or even an analyst um no matter where you are in the organization of a venture firm is to ground yourself in fundamentals and this is something that a lot of investors get frustrated by when I work with them but you know there's a reason you come to me your systems are broken and you you lack efficiency and Effectiveness to to do the job so I have seven critical steps um that I really push investors on in order to build out their deal flow process um Step One is determine your deal flow process like literally all the stages and the steps within that and that sounds like super rudimentary but I've worked with hundreds of fund managers and no kidding less than 2% of them have a fully documented deal flow management process um and I'll add to that it's going to include which due diligence measures you're going to capture at each stage and step within your deal flow process so I think we've all kind of seen like the typical examples floating around of like six stages like new opportunity screening preliminary due diligence final due you get the point um but you have to go granular for this to be really efficient and scalable especially if you're an early stage investor you have a lot of deal volume that you really have to turn through and prevent fomo like fear of missing out um the second step and and I can show you an example of this that um is really helpful for a lot of fund managers I work with is um we see that um yeah document the process that's great but how do you document it not everybody is like a word doc Smith like they look at a word doc they're like oh my gosh this is so overwhelming like do not show me a 30 page Word document for our deal flow process that's where I encourage um if you're more of like a list or a spreadsheet person to move your process into a racing Matrix so you can do it in a collaborative Google sheet if you're unfamiliar with Ry it's responsible accountable consulted and informed so literally here you'll have every task so that's every stage every step in your deal process mapped out um very tactical and then all of the team members across the top who are responsible accountable consulted and informed so um mapping this out very literally is super powerful like I've helped fund managers who do 60 transactions a year double their deal flow and get 120% more deals done at the end of the year because they've actually taken the time to put together their racy metri racy Matrix and hold themselves accountable so um this is a really powerful example of of you know how you can be more efficient in documenting that process um third in setting up your process the third step is um identifying the considerations for managing deal flow so what this means is like we all have a thesis and criteria that are our funds live and die by but we don't always stick to it um you know we get shiny object syndrome um but beyond that there are other considerations that impact your deal flow management like technical specs so maybe you eventually build your process and want to shop for a tool um do you want it to be mobile and desktop so that you can do it on the go do you want the ability to have email Integrations zapier Integrations do you want the ability to Import and Export data do you have a lot of kpis and metrics that you're beholden to especially if your firm you're working with has institutional investors um your kpis and metrics are going to be pretty heavy um that way you're compliant with your limited partner base so taking stock of those considerations and physically documenting you'll notice a theme for me documenting creating a physical list of all of those specifications all of those considerations when you build out your deal flow um that's really going to guide you to step four which is shopping for a deal flow management tool so you'll notice we covered three pretty heavy things before we ever went out and bought Affinity so everybody goes out and crowdsources like you know we're all guilty of it we go to our friends we're like what are you using for this or that well before you do that um take stock and figure out what's your own process what are your own specs and considerations then go see what tools are out there that exist and I am not shy I will give a product team like when I shop tools for clients I will give a product team their checklist and say if your product doesn't meet this checklist we're not going to buy your product um and no product on the market just so you know we'll check all of your boxes VC um SAS tools they just aren't fully there yet um unfortunately which is kind of comical for our industry that we invest in SAS um but as many boxes as you can get checked as possible so that your tool can actually facilitate that process you documented uh I've I've seen the majority of the time fund managers they'll buy a tool and then they inject their process process into it and they're like crap this does not work and I spent you know tens of thousands of dollars sometimes buying this tool and implementing it and I'm stuck with it for a year and here we are it sucks it's a huge paino people leave firms over this and get frustrated so step four then shop for the deal flow tool um step five this is so so so so important you have to identify an internal Champion for that tool and implement it so rely on your SAS partner if you're buying up and getting a premium tool don't let them be lazy tell them you know that they can help you with implementation you pay for it you just don't know you pay for it and hold them accountable and say okay this is our champion you're going to teach our champion everything about your prod product and we're going to create this Playbook together and it's going to be fully implemented and super super sticky at our firm um and that will allow you to really be able to emphasize step six in building out your deal flow process and implementing it which is stick to the process it is okay to iterate but it is not okay to deviate um I understand we all have like moments of fomo where a deal is like closing in 48 hours and it's like the hottest Aida of the century whatever and you have to get the deal done it is possible to get it done a deal done at a at a rapid Pace I have a whole process for it but you're still not deviating because if you're deviating you're compromising on due diligence you are Levering up your risk which the name of the game as a capital allocator and Venture is to drisk an opportunity as much as possible so stick to your process um if you iterate again document don't just do it in your mind and carry on your Whimsy way uh and then step seven final step is use your text deack you pay for it you implement it don't just have a text stack actually use it and I know this is really challenging because um I think we all go through these es and flows where you're like my life is perfect right now I'm super efficient I'm us using all the things to be better at my job but then like you get sick or you go on vacation and then you revert back to Old Habits Like building out a deal process sticking to it and implementing tools it is a new habit that you have to commit to so don't hold stuff hostage in your email inbox or slack um really commit to making sure it's all in that source of truth in your Tech stack um it really does make all the difference and again it sounds pretty basic and rudimentary but it is the primary pain point that I unearth in many many funds that I work with does anybody have any questions about that before we move on because that's probably one of the most drawn out pieces of today there there aren't any questions in the chat I do encourage you you know when Candace asks for questions feel free to just speak up um we have a smaller group today so that we can completely do that um I also want to double click on that documentation piece because that is something that I whenever I've worked with u an emerging manager you always tell them document everything because you know God forbid you anger an LP um they can go back to that documentation and say this was an irresponsible investment you didn't complete that documentation so just you know yeah drisk the risk essentially as Candace was saying so I just wanted to double click on that yeah thank you that's a very saling Point Katie um okay I want to move on to a couple things that I always try to mention anytime I do a webinar especially on this topic um some sort of like little known liance and security measures about effective deal flow management and due diligence um these are like easy things to avoid things that we all should be doing but some we just don't know about um so five security measures and compliance measures to follow first is please do not discuss deals over text message like just don't do it um it's best to use fully encrypted Solutions like a slack or Whatsapp that's under two Factor authentication really everything in your text stack should be under two authentication um it's really easy to steal phones devices especially if you're using Apple products somebody gets a hold of your Cloud you're screwed um I've been in legal conversations where this has happened so at all costs avoid so if you have a GP out there who is uh doing this a lot of them do please discourage that um you can do high level but you know you don't want to compromise any private data for these companies that are in your pipeline um two I mentioned TFA but um using an encrypted password tool like one password super critical um again hacking happens accounts get compromised like please please please protect your deal flow it's your biggest asset and these companies are relying on you um I have been in scenarios where fund managers platforms have been compromised and their companies have had to be informed imagine having a pipeline with a thousand companies and you have to email all of those Founders it is not fun so keep that in mind uh thirdly store everything in the cloud we we mentioned like commit to your Tech stack store everything in the cloud no native desktop storage like my computers are all wiped out every Friday that's just like a very committed habit I have don't store anything natively keep it all in the cloud under Toof authentication protection so you never have to worry about any private data of your firms or your companies being compromised and then the last thing um this is a Hot Topic is um please avoid putting any private sensitive information into AI tools like chat GPT um I have been working with a lot of fund managers lately who are obsessed with automating all the things and using AI it's awesome but we just don't know a lot and I actually asked chat GPT like hey um you know should I submit sensitive information to chat GPT and it gives you a response and it's it's like basically don't do this like there's a lack of security um privacy there's obviously security risks and data retention is huge because open AI uses this information to shape and mold their models and their llm so just know that if you're putting portfolio company memos in there to be synthesized and summarize or you're putting portfolio company updates into chat GPT and asking them to summarize in exercise you are compromising the trust of that company and you're out of compliance with your own operations of putting private data in there same goes for like your firm's um private information you do not want to put that into chat gbt either um so just be really really careful about that um I have someone I Mentor at a very big organization that is currently in a legal Pursuit on this very topic and it is not fun I'll say that so just please avoid that that's my hot tip there um any questions about compliance or security before we move on I do have a question um so for it so regarding the texting um about deals that's just sensitive information regarding the companies that you are either investing in or doing due diligence on it's not necessarily your opinions or thoughts on the company and whether it would make a good investment okay it's a really good clarifier I say don't do it at all okay um in in that scenario because um think of all of the things we seen seen on Twitter X of fund managers getting outed and screenshots coming out if you Katie text Kaye and say oh I think that you know ABC Co is just hot garbage I heard that the founder is an egomaniac and 10 out of 10 you know would not invest or zero out of 10 would not invest like that could always come back to haunt you so for that reason just for like reputational Hazard risk avoid it um but as far as like when I mention really high level details are like you wouldn't say like hey Kaye we're trying to get this deal close like it's you know a 1 million investment on a 20 million cap like where are we on this like I need you to get those docks and term sheets updated blah blah blah like that's some pretty sensitive information um obviously want to avoid those sorts of scenarios that's why I just default like put the slack app on your phone put it behind TFA and just keep everything in slack if you're a slack organization great answer thank you yeah sorry that's a bit of a buzz kill but if you've seen as much litigation as I have in Venture Capital which is not really ever talked about because no one wants to reveal that um yeah he it's an unfortunate Lessons Learned um over the years so um I want to move on to some due diligence topics so um Kaylee asked about um okay due diligence efficiency so I'm kind of going to go off script here so all right being efficient with due diligence you know it's challenging because I'll give you a hard example um one of my clients they have institutional um LPS and they have more than 160 due diligence points that they have to capture for every single deal and they do on average 60 transactions a year it's super high volume and they're a team of only four so imagine they have been working me with me the last two years and the the number one point again super boring but it's it really has come down to them documenting everything and having their process well defined um they live and die by their racy Matrix like every time we meet and we talk about any sort of bottlenecks or challenges we always refer back to the racy Matrix and I hold them accountable to it they hold themselves accountable to it so um if you're noticing inefficiencies I think a rasing matrix is a great aspect but I think Kaylee what you talked about specifically is like the Deep final due diligence of like figuring out the competitive market and Landscape Etc um that comes down to like process efficiency I see so like I don't know like your firm and your fund um your all's thesis but um if you're an agnostic fund it's really challenging yeah because you're like you're all over the place okay you're you're investing in every vertical so this comes down to a data play I see in a lot of funds is um it's really challenging this can take like a year to retroactively figure out but if you haven't already um assuming you have a strong Network figure out who your subject matter experts are um have really strong data and tagging and whatever system you're using if it's you know an affinity or deal Cloud whatever um or if you have a CR RM in addition to your deal flow tool get really clear on the profile of your subject matter experts um and how that overlays on your pipeline so ideally you're using the same tag so like every AI expert aligns with the AI tag of the company and every you know go go to market expert in your network aligns with any company in your pipeline or portfolio that has that same need the sooner you have that data um Library data dictionary figured out and can overlap those data points you can query your databases and say like okay we have a deal in the pipeline they're in final due diligence we know we need to go hard and heavy on really susing out the competitive landscape figuring out the market sizing Etc um how can we query our database to figure out who in our Network can help us get this over the line and then I go level deeper because I'm an insane person I have templates for everything so I have email templates for reaching out to those subject matter experts like this is the ask this is the process this is the timeline I need your feedback on you know this particular aspect of this company um kind of giving them a mini job description and I worked with a lot of funds where I have a formal onboarding process for all their subject matter experts so that they all know the Playbook they know that they don't get called on all the time but when they do get called on they're like oh okay this is the Playbook I have like 48 hours to review the documents give my assessment of you know the market based on my domain expertise Etc um you asked about efficiency again it boils down to data and process for me the more um repeatable you can be the more scalable you can be the tighter that timeline can um become to really get due diligence over the line does that help Kaylee yeah absolutely and like the subject matter expert setup is awesome I think we informally do that but like you said it's not tight so it does take some time of like I think I know a guy I talked to someone last year who's an expert in this field but I can't remember their email yeah this is awesome thank you Candace you're welcome and and I'll I'll drill down a little bit if anybody's having trouble with this um I worked in several firms where like the GPS are the most networked people typically at a firm and they hold their Network hostage sometimes it's intentional sometimes it's intentional and that's where I come in and I kind of like smack them around a little bit and I'm like listen like you are the worst enemy of your fund right now like you need to trust at least one person on your team to take your network and put it into the CRM create guardrails and measures like there's some great crms out there where you can put um you know sort of a black box around certain cont uh contacts um that way at least one person on the deal team can query that Network to figure out and go to Mark and say Mark um you know Susie over here in your network would be perfect SME to check out this company that we really need to get the DD done on can I please email her and he knows oh she's going to follow her scripted process over there because we have everything email templated sweet all right um I want to make sure okay quality okay make sure we get on some topics that kind of if there are any other questions too is things are coming to mind like feel free to ping me or Katie happy to do that um okay I want to get into um dealbreaker questions to eliminate non-fit so this is a like a this is an answer to a question I commonly get which is like oh my gosh I have deal flow and I'm overwhelmed we're a small team or under resource like how the heck do we plow through all these deals but not miss out on the right ones um and that's where I have like these three primary suggestions of like what are your deal breaker questions this is my first question of an investor I'm like okay then what are your deal breaker questions to take it from 1,000 opportunities down to 100 and the first is like what is your thesis again super simple but if on the outset of your deal flow management process and in your due diligence your initial due diligence and that sort of screening process process you're not quickly figuring out does this company align with our fund thesis two is our investment criteria um and third is our fund model then this company has no business moving through the funnel um what I see more commonly is you know you go to a conference you need a company the founders is like awesome you hit it off personally professionally all the things their company sounds really exciting and you're trying to shove a square peg in a round hole where you're like wow this company sounds great they don't really fit our mold well then you spent all this time okay you've invested all this time that's very unnecessary in this company so I really encourage investors is like whenever you have conversations with Founders if they come in cold or warm inbound outbound whatever very quickly if you have an application for investment form I really like forms some investors are opposed to forms because they think it like is a turnoff but if you have a high volume firm especially if you're agnostic and you're an early stage investor and you get a thousand plus looks a year a form can be really great to figure out you know is this company a SAS company because that's all we invest in is this company a clean tech AC Tech Energy company because that's all we invest in if not you know move them to the side um do they have product Market fit do they have paying customers um are they seed stage companies if not move them to the side um you know do they even fit your fund model fund model and strategy as far as like um the target ownership or their specific um you know check size they're seeking um a lot of those things get teased out after a second or third conversation and that's just a huge time suck so if it's a form or if it's you just being as bold as asking like these three questions like feces criteria fun model fit if not move along um I'll say too that if you're using a form again which I do recommend um you know I have templates for this just so it's not like this arduous you know overbearing form but that data you collect is so so helpful to figure out raising fund to three four and so on because if you decide to raise a fund that is a different um feis it validates that feis so like let's say right now your fund only invests in agtech Klean Tech energy but then you notice like wait we're getting a lot of like healthtech deals and a lot of fintech deals like startups do not read your marketing I mean it's just like VC 101 they'll send you anything um if they fit or not but it could be a good opportunity to see like oh we have another opportunity here to raise another fund and figure out like hey we we could raise a whole fund because we have this super robust pipeline over here of all these companies that could fit another thesis um let's see we have a question another weird thing we've considered recently is this deal out of our Focus area but so good we can't pass it up and if so ironing out the criteria for that so I I was going to prompt a couple of questions to you Candace and this is a great example of something I was going to prompt to you which is that you know two two things one if you're raising a venture capital fund then in theory what is it 20% of your Investments do don't legally have to be in thesis but is it a good idea to go outside thesis for that 20% and if so when is that occasion appropriate and how do you figure that out out so this really covers that and then the second part of that if you're an angel investor which I know some some people here are then um why is it that you have to come up with a thesis and and of course you know I'm curious as to your answer um why do you have to come up with a thesis and um why do you have to stick to that thesis right because it's your money so you don't have LPS coming to you saying well this is what I'm investing in so I want to prompt you on those two things and of course you know K kayle's question within that first one okay cool I made notes um all right so yeah um bomo is real I talk about it a lot like the fear of missing out especially in the wake of like AI like I mentioned so um the way I approach this and I tell every fund manager yeah there's that carve out where you give yourself the latitude and you can kind of go off script but just know to Katie's Point document everything because if that investment fails it doesn't look good if it if it wins no one cares like your LP base is happy you know they don't care but if it fails which you know the odds of failure are pretty high in this high stake scheme of insure investing in startups um just know that you have to be held accountable to that um and I encourage fund managers that if they want to go off script and deviate from their thesis to at least have some sort of sense of what is the potential future outcome of this investment as far as like it is it so far removed from our expertise that you know it doesn't make sense to raise a future fund on the back of this company's potential success in this success story then it may not make the most sense to do it if you are deviating and investing in a company Off Script because you know you are very good friends with very accomplished investors who are very confident in this deal and it's like a Serial founder who's already had two unicorn exits and it's like yeah I don't think an LP base is going to blame you for taking that gamble but just know that you have to answer for it and that's where I always encourage fund managers to document internally but never publicly like what is the subtext here of like we're doing this deal Off Script because we've done these deep reference checks and know the the the probability of success in the ROI potential is super high relative to you know the majority of our current portfolio stake or whatever it may be um outside of thesis so okay if you're an angel investor or family office so I worked in a family office we were um we were super committed and I've worked with Angel since Syndicate networks as well built those syndicates out and you know that's kind of the beauty of being an angel investor it's your own money you can do whatever you want however if you are Angel Investing with the intention of raising a fund someday there is value in committing to a thesis and developing a thesis um and that's just if if that's a goal for you if it if it's not whatever um there there have been plenty of fund managers even with some I've worked with recently that you know even in these tough market conditions they've been successful in raising agnostic funds because they're deeply networked um they have a strong reputation by virtue of being a Serial founder or a successful investor or their very agnostic Angel portfolio has been successful um just know that it's um it's a strategy play it's a long-term play so if you want to go off script as an angel or family office that's totally your prerogative but if you're long term vision is to raise a private fund from LPS um you have to be able to tell them like this is why I'm an expert this is why I'm going to succeed at this I've already made 15 agtech Investments I know this space up and down look at my portfolio and track record performance um did I cover it all think I did yeah no you did a great job uh I I believe and so I this is something we had discussed a little bit before um i' I'd be interested in being able to share the response with some people um but we don't have to go down too deep into it so along the lines of as an in angel investor you you know you have your thesis if you want to raise a fund um my kind of advice to Angel Investors is create a a thesis to make it Le if you're jumping into Angel Investing right create a thesis so it's less overwhelming and so that it it is easier to start that due diligence and kind of jump into well this is an area of my expertise now what if an angel investor comes across uh an investment that is outside the area of expertise and it is technically not something they know anything about should they just bring in an expert on that area or um what are your thoughts on that yeah so no no no no so there's like three things is I'm always a fan of playing to your strengths like invest within your scope and your domain expertise just like so much easier to like vet and validate and if you ever get a line of questioning like hey I'm an expert um two is I say hire for your gaps so this can come into like um adding to your team but if you don't have a operating Capital to do that or if you're an angel investor and you're like clearly just a solo actor is there are plenty of subject matter experts for higher out there um and I I know a gentleman he's like a healthtech expert and this is his full-time job he just does Health tech technical due diligence for VCS and private Equity firms um full-time and you know those people exist and the good ones have a Playbook they can give you like a range rate of like do you need initial due diligence or do you need like deep final due diligence on this company if so this is relatively how much it will cost um and then the third Point kind of back what we were talking to earlier with Kaye is um using a subject matter expert or an agency um especially there's a lot of these Outsource development shops now for like technical development um you can rely on them all sorts of experts um they'll have typically like hourly or flat fees to help you with due diligence if it's not within your domain but again know that the expectation is to get a very detailed report from these individuals and an investment recommendation um I have like a comprehensive due diligence checklist and I provide the technical specs um breakdown two providers for my clients I'm like these are the five questions you must answer or you're not getting paid and I need your investment recommendation um and and I also get the double opt in from the company like don't hire a provider to do due diligence if you don't have the double op in from the company to make sure there's no potential conflict of interest interest it's etc etc um just know that it's like a really good like customer service Centric performance there great thank you one question on that sorry to be hijacking um as long it's helpful I'll keep answering them so uh so when you do the double opt-in or or hire somebody to do that external due diligence um Venture capitalists don't tend to sign ndas is there an expectation that this expert also does not sign an NDA yeah great great question so what I've typically seen it's not in daas but it's like in the contractual agreement there's like a confidentiality Clause that's what you'll typically see um and there's like boiler plate language that your attorney can provide you or some of these good like providers that already do this they can have boilerplate like templated contracts that spells out like hey anything you share with me I won't share it's all kept confidential etc etc okay perfect you can go on to the next one now yeah um okay I think something super important while we have some time left is um you know what do diligence do I ask for and when that's like a super common question I ask for and kind of plays into efficiency measures so um I'll show you um some examples here so um back to the point of documenting your deal flow management due diligence process what you're seeing on the left is like a glimpse of um lbl like comprehensive due diligence checklist you can see an example here for like the new opportunity stage these are typical things that most fund managers like especially institutionalsales to complete like on an investment form um so pretty typical stuff um but again make sure that whatever questions you are asking in um can help them a get out of your pipeline faster and I don't mean that to be harsh it's just like the majority of the companies that enter your pipeline you're never going to do those deals okay and the quicker you can get to a know the better um so what is your thesis your criteria what's your fund model strategy ask questions around that to dictate um what sort of parameters that you can attack to to really get them out of your pipeline faster what you're looking at on the right um one of my clients um they're the ones that do 60 transactions a year we um we believe in transparency it's actually a very big part of my personal ethos as a fund manager I don't believe in holding your deal process and your due diligence hostage I believe in being transparent with Founders um it's a really good relationship building mechanism so this document is public on their website any founder any investor can download this document and it covers the bases of typically um what they're going to ask for they ask for more but this is a very good starting point so that um you can see as a Founder what this investor expects from you and at what point in their due diligence and deal flow process so they start out with an application um it defines here the parameters they are um location specific they only invest in companies in Kentucky so again again thesis criteria and fund strategy if you're not in Kentucky bye you're not in the pipeline anymore um so examples like that are really fitting it spells out here what they're going to ask for at the screening stage preliminary due diligence final due diligence final due diligence is where they're really digging in I feel like a lot of fund managers um they spend time kind of spreading all of their due diligence questions out over the whole process but I like to bucket them and um provide them to Founders where it makes sense some Founders get really overwhelmed and they're like oh my gosh you're going to ask me for a hundred things like this is just too much but I always encourage you to be transparent and if they want the full checklist like just send them the checklist like we're going to ask for your financials we're going to ask for your business plan we're going to ask for resumés and bios and all these things so if they're a proactive and productive founder and they have like a really really badass deal room hopefully all this is already in there but if not they know to put it in their deal room it makes your job a lot easier so these are recommendations of um in this particular client's case but again I have um like an Institutional grade uh due diligence checklist of what I recommend asking for and when during your deal flow and due diligence process so that you can be really effective and efficient um and again like making it known so that your Founders are never surprised and the really good ones like I said they'll get you all this information really readily if you make it available any questions about that no all right sweet we're we're doing okay on time we have like seven minutes I just want to be cognizant of that so um all right I think I will I think an important one I'll cover will probably end with this one is like the five red flags that are commonly ignored by fund managers um and this one is you know I get this a lot because you know we all we all want to be good at our job we want to make sure that we do the right deals they're done well they're well diligen and you know there's a whole litning like my um my guide to executing due diligence really comprehensive these are like the top five that I pull out based on the mistakes that I see a lot of fun managers make so the first one is um really overlooking technical debt um technical debt is um huge but something that we're seeing shrink hopefully um in the wake of like AI for development and things like that but what I mean it's not necessarily like physical money debt it's you're looking at these early stage companies with like really early Mbps and they've made decisions that are like using duct tape or bubble gum to like get the product to Market get like that early demonstration of product Market bit get customer feedback Etc but then you look into the the tech and the development of it especially if you're not a technical investor I think um again my materials that it gives you at least the questions to ask if you're a non-technical investor to figure out like do they have some technical debt issues here that I would want to look into that kind of like make my skin crawl or perk up to me and it's you know have they developed um have they raised funds um on the permise of developing one product and then they kind of deviated and learned that they had to rebuild that product so then they've spent all this money on all this infastructure and they go to sell the Enterprise customers and they realize that their their data architecture and infrastructure cannot support those customers so then they have to re-architect the product and kind of go back to square one and then they're coming to you as an investor and they're asking you to pay for that it's like we all see like the pie chart like use of funds like 60% for you know Tech and development and if you really dig into like that slice of the pie and learn like oh crap like they're kind of going back to square one here they've like built on a you know an outdated platform or you know their a AWS usages like alha wazu um really did digging into their technical debt and how they've developed the product is going to give you a lot of insight to determine how far does your check go in this company um are they based in reality or are they being you know not so conservative in how they're going to spend your million-dollar check um as they build out the platform so technical debts a big one um second is really unrealistic projections um if you're not like a deep Financial mind which I'm not I typically Outsource Financial due diligence um early stage investors you don't have to do a lot of deep Financial due diligence but um nonetheless whenever companies are forecasting especially early stage companies and you know they're saying like yeah we're gonna hit like 500 krr by by the end of the year and you're like wait a second you just started raising like Q3 is like a handful of months away and you're only at like 20K in AR like how's that even possible like do you have some magical sales wizard I need to know about so I think really challenging them on you know how they're forecasting and are they being very realistic in those um details is super important and you know do they have a very realistic timeline for those um for the raise and like how that translates into the other aspects of the business so like say they're raising you know three million bucks and they're going to achieve these lofty goals by Q3 well if you back into it and you've ever run a company before you're like wait a second they've got to get the money in the bank from the investors they've got a build out a recruiting process they have to hire the team they have to onboard the team then they have to scale up their Ops then they'll hit their revenue Target like is all of that going to happen in three months no again they must have a magical wizard I don't know about um so unrealistic projections are are a huge one um to to consider uh third poor market research um I think we I think we see the companies in our pipeline who say like yeah we all see like the table like these are three competitors and the check or the x of like what they do versus what we do and we do all these things and they don't do any of these things and this is what makes us wonderful um that can get really exciting but um that's where I really pivot into digging into like do they know their customer um are they like wholly committed and married to their customer like I'm an investor and I'm important but the most important person in your life is your customer like do you really know them and two is like how long before your competition Stomps you out like if they don't have that self-awareness to know like and be honest and realistic of like yeah somebody can come along and stomp us out tomorrow like you don't want to hear that as an investor but you also want them to be grounded in reality um and always perform your own market research don't just rely on P pitchbook um there's this is going to sound bad but pitchbook just doesn't have the best data I'm sorry I really don't it's pretty flawed um so just know that you can't just rely on pitchbook data to do that market research um moving on another red flag I see a lot of fund managers avoid or Miss is just inadequate Market fit um again we all see like the Tam the Sam all of that it gets really exciting but I want to hear that a Founder has done you know hundreds of customer Discovery interviews and they can wholly spell out you know my customer's a 35-year-old Millennial mom who goes to Starbucks every morning and has a disposable income of 180k a year or whatever like the more specific the better um when I hear that that companies have done that really deep customer Discovery I am more likely to lean in and understand that they have a good Market fit and not just rely on some like you know Litany of data that's out there that's reported on their Market um La last is uh a lack of transparency so this takes time to build rapport with Founders but if they're giving like vague responses they lack responsiveness um they're not very timely they're kind of evasive um skittish or they provide information reluctantly my experience is they typically do have something to hide um and again that's kind of tough to establish but um I think it's it's really really important to identify on the outset and and know that transparency really does lead to the best outcomes I know we're like right on the line does anybody have any other questions before we wrap it up all right sweet I want yeah I just want to say thank you so much this was been an amazing uh conversation uh definitely incredibly useful to myself and I'm sure everyone else um and I will um I I I know you you still have a couple more things to talk about but I'll be sending an email out to everybody who registered and of course anyone who attended um with a recording of this and um you're more than welcome to email any questions you have back to that and um I can make sure you get an answer from myself and Candace so now was not your last chance but so feel free to to reach out yeah yeah happy to be of service and if you have questions after um you know feel free to reach out happy to do that um I'll drop a link in the chat and then I'll just give you some visibility here um I doesn't want to enter there we go ha um I'll share with you really quick um I sent you a link so I've talked about a lot of examples today and you know things that I've developed to kind of like take the guess work out of this for a lot of fund managers is I have a comprehensive Library the legible library that has all 30 of my playbooks but um just for you all I pulled out only the deal flow and due diligence pieces and um you guys can visit that link scan this QR code it's going to send you the same landing page for the investment process and due diligence bundle it's going to have all of the proven playbooks processes Etc um already provided to you um and you also get a free hour of Consulting with me so if you review all these materials and you're like okay I want to implement these how do I go about it you can tap on to me um right now for the next week I'll make it available to you guys for 75% off so 51 bucks what a fun number right um it's valued at over like $2,000 um but happy to make that available to you all just to make your lives easier I believe in making your lives easier because it's it's tough to be a fund manager and investor so if you all have any questions feel free to reach out to me um thank you for the time really exciting to do this and uh have really really enjoyed spending the time with you all the day awesome like I said thank you so much and that that link will also be included in the email that I send out so um if you didn't get a chance to copy it or QR code it scan it I guess is the proper term uh then it will be sent to you great thank you all so much thanks for spending time with us today you have a great rest of your week yes and thank you Candace everyone have a good one thank you appreciate it bye bye