Most AI startups struggle with due diligence. I’ll walk you through how we prepared to get through it smoothly and close our funding round faster, keeping investors interested along the way.
The Framework That Actually Works
Here is a simple framework for evaluating due diligence. It's not complicated, but it requires discipline.
Step 1: customer feedback is the only metric that matters
This is where most people go wrong. They skip this step entirely and jump straight to execution. Don't do that.
Step 2: your team matters more than your technology
Once you have the foundation right, this becomes much easier. I've watched founders struggle with this for months when the answer was staring them in the face.
Step 3: Iterate relentlessly
Nothing works perfectly the first time. The companies that get due diligence right treat it as an ongoing process, not a one-time project.
The Counterintuitive Truth
In due diligence, the best practitioners often do less, not more.
The lesson: timing is everything in this game. It sounds simple. It's incredibly hard to execute.
What I Tell Founders
Before deciding anything about due diligence, start with three questions:
What's your timeline? Because the right approach for a company with 6 months of runway is very different from one with 3 years.
What have you already tried? Most founders have tried something. Understanding what didn't work is often more valuable than knowing what might.
Who on your team owns this? If the answer is "everyone" or "no one," that's your first problem to solve.
These questions seem simple but they reveal a lot about where a company actually stands.
This connects to broader themes around AI talent wars, AI market sizing, AI pitch decks, AI exit strategies, AI competitive moats that I've been thinking about a lot lately.
What's Next
Best practice in due diligence is changing fast. What worked last year might not work next year. That's both the challenge and the opportunity.
My advice: stay curious, stay humble, and stay close to the people who are actually doing the work. Read less thought leadership and do more experiments. Talk to fewer consultants and more practitioners.
If you're building in this space, the best time to get due diligence right is before you need to. Don't wait for a crisis to force your hand.
I'll keep sharing what I learn. This stuff matters too much to keep to myself.
Frequently Asked Questions
Q:Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.
Q:How has this view evolved over time?
My thinking on most topics has changed significantly over the years. Early in my career, I held many conventional views that experience proved wrong. I try to update my beliefs when the evidence changes.
Q:How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.
Q:What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.