A responsible investor in 2021 simply cannot ignore the impact technology has on the ability of their portfolio companies to scale. Empowered by funding, companies can grow more rapidly than ever, yet without a clear technology roadmap and a strong IT infrastructure, increasing the business volume by 5 or 10 times in a short period of time can lead to disastrous results. To empower investors to make better decisions and put a spotlight on areas where funding is most needed in a potential investee, Enable chose Remote Technology Due Diligence as one of the core offerings. In this article, we will explore what a typical technology due diligence looks like.
Enable’s Technology Due Diligence projects are performed fully remotely, allowing our clients to avoid having to cover the expensive travel costs whilst still receiving a quality report in the shortest time possible. We make it happen by:
- Performing remote interviews with key stakeholders on the potential investee’s side
- Analysing the documentation provided (and noting where it is missing)
- Investigating the backend set-up of the existing technology through direct online access to tools
This gives us an additional insight into how well the technology related processes and procedures are documented and how prepared the companies are to hand over the maintenance of various pieces to new employees.
The resulting report first describes the overall application network, providing an overview like this:
It then goes into detail of the functionality of each tool with a focus on our expert opinion on how well the tools serve their purpose and whether they’re efficiently integrated with each other.
In case of companies who have developed their own in-house solutions, we dive deeper into the intricacies of the system and potential vulnerabilities. We look for what works well, where the risks are, and how well the internal IT and operations teams are prepared to handle scale. We check what is not working, what could be improved and what should be improved.
We then follow with a deep dive into the business processes and examine how well the technology supports them. This can lead to the generation of flow diagrams, which help to tie operational processes to repeatable technical processes.
Finally, we summarize our findings in a comprehensive way and list the clearly prioritized recommendations.
Our reports provide insights into technology while at the same time being easy to understand for a non-technical person. We focus on guidance rather than a complicated technical report only an “IT guy” would understand. We know that investors are busy and value a clear message over a complex 100-page report. For the same reason, we also provide a summary of the due diligence in a short presentation form (see an example here!). This proves particularly useful in external communications you make as an investor.
Our reports have highlighted issues such as:
- Business Intelligence charts showing incorrect revenue data and potentially leading to wrong conclusions
- Overpaying each month for a database much too big for the amount of data the company was generating
- Relying excessively on one human resource
- Relying on manual processes vulnerable to human error for key operations
- Serious security risk through reusing the same password for all application users and publishing it in a widely available documentation
- Lack of clearly defined business processes
These are just a few examples. No company is perfect and we find that the technology issues and risks can range from minor to critical. The key takeaway is that for our investor clients understanding the potential investee’s use of technology has allowed them to de-risk their investment decisions and focus the funding on the areas that promote scale most efficiently.
Are you an investor or a fund looking to gain a more complete picture of your potential investee’s business before you decide to invest? Get in touch with us at email@example.com