Metis - Empowering VCs (beta version)

Operating Due Diligence


Operational insights (non financial KPIs/non data room) are critical inputs when VCs/PE are assessing a venture and if they are going to invest. 

They reveal how a venture is really operating day to day. Small operational issues (or untapped potential), can have big impact on growth. 

Getting that full picture, is key.

Why? 

  • Traditional investor due diligence processes rely on a standard set of homogeneous factors: " ...founders were cited the most frequently—by 95% of VC firms—as an important factor in decisions to pursue deals. The business model was cited [...] by 74% of firms, the market by 68%, and the industry by 31%". (Harvard Business Review "The Most Important Factors for Venture Capital Investing" by Paul Gompers et al., published on March 23, 2016).  
  • Theres a gap. Operational factors are overlooked yet they are key to how (and if) a venture can scale and execute. 
  • "I didn't really respect what the ops and finance people of this world did [... ] if we'd have better prepared ourselves for that [...] I think Gymshark would have grown far quicker'' (Ben Francis Founder, Gymshark. Diary of a CEO Podcast, Dec 2021).

What? 

Enriching the traditional due diligence process that VCs / PE firms follow when reviewing a venture. 

Providing additional insights from a deep operating mindset and listening/observing/analysing all that's happening 'on the ground'.  

Feeding this back to VC/PEs to enable more informed decision making and strengthening the plan for post investment execution

How?

Operation management business process control optimisation industrial technology concept

1) Viable Target Operating Model?

  • Understand a venture's target operating model (if one exists) to understand the growth / operating vision
  • Do the founders accept (or understand) the operational challenges they face, to deliver the vision?
  • Understanding how (if) the team / tools / processes and mindset are set up to deliver operational excellence linked to the growth story 
  • Assessing continuous improvement. Are the teams failing, but then learning, quickly enough? Or are repeat errors holding the team back?
  • Having worked with auditors, lawyers, regulators, lobbyists, compliance and 3rd parties, can give additional insights where operational risks may be a barrier to growth / execution
Wooden blocks with people icon on yellow background. Organization structure, social network, leadership, team building, recruitment, management or human resources concepts.

2) Team:Founder alignment?

  • Observing/listening to the teams (across all levels), their interactions with leadership. Diagnosing what works / what doesn't / execution challenges misalignment may create
  • Observing the interactions and non-verbal signals which reveal how team/leaders align. Team culture gaps, ineffective communications, quiet frustrations, interteam conflicts; all of these can impact delivery of the strategic value proposition
  • Assessing how daily operational challenges/pressures may negatively impact (or be impacted by) decision-making processes. Poor/slow/fractured decision-making will limit the potential of the team or keep founders tied to micro-management behaviours
The concept of productivity and production capacity encompasses industrial management focused on efficiency and streamlined processes, including capacity planning, utilization

3) Hidden KPIs / data points?

  • Reviewing data points / seemingly 'irrelevant' metrics which reveal much about the real 'operating' story of that venture
  • Linking these data points together - building an end-to-end picture of how the team operates and measures what they are delivering / supporting / building
  • Mapping lowest-level execution behaviour / tasks / delivery to the strategic roadmap. Is there alignment? Are people working on the wrong thing?
  • Finding operational challenges (or untapped potential) which may frustrate the team / founders / investors..... Pointing to these early, can help avoid escalation