Early stage investors face 3 main risks when they assess a startup investment:

(a) Market. Can MONEY be made?

(b) Competition. Can they WIN?

(c) Execution. Can the FOUNDERS DELIVER?

For (a) and (b), we research the competition and do reference calls with early customers.

But the execution risk is also a hard one to understand, because it’s driven by the team. And, you know, people are pretty unpredictable ;-)

It’s the founder’s task to deliver in plenty of domains including, but not limited to, hiring and team management, sales and marketing, fundraising, etc.

Particularly, at the stage we invest at Point Nine Capital, the responsibilities of the tech and product team are:

To iterate fast to meet the customer needs on time (speed of development)

(speed of development) To deliver a product that works at the scale needed (reliability)

At the stage we invest, we don’t expect companies to be perfect, but we need to figure out what level of technical execution risk we face. Lately, we have been working on a more standard technical due diligence process to understand that — which we run in a 1 hour call with the tech founder.

By having a more standard process, we hope to:

Grasp better those risks.

Decide faster about new investments (“good VCs don’t waste founder’s time”).

Help the founders understand some of the challenges to come — “unknown unknowns” — so they can figure out how to address them.

We are aware that we don’t have a perfect process.

Now, we want to share it with the community to get feedback and to try to make it more helpful for everyone involved.