Metis - Empowering VCs (beta version)

Operating Due Diligence for VCs


Operational insights (non financial KPIs) are critical inputs for a VC when assessing a venture's potential. They reveal how - and if -  that venture can truly scale/execute.

The 'butterfly effect' is instrumental in a growing venture. Small issues (or untapped potential) in a team, can have big impact.

Why? 

  • Traditional VC 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 follow when reviewing a venture, going beyond the pitch deck/data room/founder interviews. 

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

Feeding this back to VCs to enable more informed decision making.

How?

Operation management business process control optimisation industrial technology concept

1) Mapping operational excellence

  • Understand a venture's target operating model (if one exists) to understand how growth can be achieved
  • Understanding how the range of daily operations align with the strategic vision of a venture
  • Having worked with auditors, lawyers, regulators, lobbyists, compliance and 3rd parties, flagging where operational risks may be a barrier to growth / execution
Risk management process

2) Gaining insights from team & founders

  • Observing/listening to the teams (across all levels), gaining their trust and asking the right questions to gain new insights
  • Learning from subtle interactions and non-verbal signals which reveal misalignments, disagreements or culture issues which can impact team performance and execution
  • Assessing how daily operational challenges/pressures may negatively impact (or be impacted by) leadership & team decision-making processes
The concept of productivity and production capacity encompasses industrial management focused on efficiency and streamlined processes, including capacity planning, utilization

3) Digging into operating KPIs

  • Reviewing data points and team dynamics which reveal more about the real 'operating' story of that venture
  • Linking these data points together - buidling an end to end picture, mapping lowest level execution behaviour to strategic roadmap 
  • Flagging operating challenges (or untapped potential)