Source: Confluence.vc
These questions are just a small sample of what the Confluence.vc team has put together. They have a great resource put together with reading lists, diligence questions, and analysis templates. They focus on people currently in the industry, so this would be a great resource to look into once you've landed your first gig in venture.
Team
- What led to the formation of this company?
- Does the team have operating experience to measure?
- What is the quality of the previous operating experience?
- Do they have prior experience managing teams?
- What are the founders’ unique skillsets to tackle this problem?
- Do the founders have complimentary skill sets?
- Can the founders work together?
- How did the founders meet?
- What is the expected window of opportunity for each founder (how long can they go with suppressed income)?
- Is this an authentic idea that is true to the founders’ passion or a hollow attempt to make money?
- Have the founders hired somebody before?
- Do the founders have a network that allows them access to talent?
- Are the founders charismatic enough to attract talent?
- Are the founders based in a market that allows them access to talent?
Business
- Is the business model clear?
- Who within the organization are you selling to?
- Why do users care about the product / service you are offering?
- Does the targeted person / role have authority to make purchasing decisions?
- What is the value proposition?
- Is the value created easy to measure or will it take time to market the ROI?
- What organizations / people are you selling to?
- What is the customer profile (role within the organization; demographics)?
- What steps need to happen in order for a buying decision to be made?
- Will target customers be able and willing to pay a fair price for your product?
- Who is the largest customer today?
- Who are the competitors?
- Are you a first mover?
- Is the product better, cheaper, or faster than existing solutions?
- Is the product incrementally better or 10x better than alternatives?
- What features do you offer that your competitors do not?
- Why do your users care about these features?
- What is your competitive advantage?
- How defensible is this advantage?
- How easy is it to replicate your competitive advantage?
- Why would a buyer leave a competitor for you?
- Is the company building on top of other platforms?
- What is their relationship with the platform they are building on top of?
- Are product plans in the direct path of the platform, or is it complementary?
Market
- Are you selling into an existing market, or are you creating a market?
- Is the market large enough to for the company to capture a significant chunk of it?
- What are the megatrends over the past 24 months that lead you to believe this is an expanding market?
- Is there a shift in consumer behavior that strengthens this market?
- What are the barriers to entry?
- How strong are the barriers to entry?
- Are there regulatory challenges within the sector?
- Has investor interest increased or cooled off over the past few quarters?
- Have investors already invested in a competitor?
- Is the timing right and why?
- Have other similar companies been formed before?
- Why have other similar companies failed?
Tech
- How much progress has been made towards product development?
- Does the company have to create new tech, or are they building off of existing infrastructure?
- Has the product been built in house, or is it outsourced?
- Who is in charge of development?
- Are there any patents pending or issued?
- What is the product roadmap, and what new features are users asking for?
- Is the proposed product roadmap realistic and can it be executed in the proposed timeframe?
- Can the largest customer influence pricing, product roadmap, etc.?
Financials
- How much money does the company have in the bank?
- What is the current monthly burn?
- What is the burn rate going towards?
- How much runway does the company have before requiring additional money?
- Does the company have enough time to meet its proposed goals?
- Is revenue assumed, or is there evidence that people / customers will buy your product / service?
- Are customer contracts prepaid or not?
- Are there different pricing tiers?
- If there are different pricing tiers, which tier is most popular?
- What metrics are you tracking?
- Why are you focusing on these metrics?
- How have these metrics changed over the past year?
- What is the trailing top line growth over the past year?
- What are the projected growth rates?
- What assumptions are driving growth rates?
- What percentage of revenue does the largest customer contribute?
- How were existing customers / clients sourced?
- What are the churn / retention numbers?
- Have much of the company is still controlled by the founders?
- How large is the ESOP (employee stock option plan)?
Strategy
- How are you planning to market to the specific users you are targeting?
- What is your customer acquisition strategy cost today, and how do you see this strategy evolving?
- How are you recuperating the acquisition costs?
- Is there an opportunity to up-sell or cross-sell, or will LTV of the customer be derived from recurring revenue streams?
- What steps are being taken to ensure you are solvent enough to reach your next milestones?
- What are the biggest holes in your business today, and what steps are you taking to fill them?