SAC III due diligence

After the semifinals, our group of 33 investors was able to actually vote on the finalists. We announced the finalists over on the SAC blog. They included the following companies:

Phytelligence

Nimia

Shift Labs

Staging and Design Network

Daily Dollar

Guide Analytics

The due diligence teams began their deep dive into these companies. I ended up on the Staging and Design Network team and through the many weeks of narrowing the 43 companies to these final six felt that I had friends and responsible investment colleagues performing due diligence on the other companies. This was a good feeling, even if it is only a $5,000 investment - I am not the type of person who is ok with throwing the investment away on a company that isn't the best risk adjusted option of the group.

Through the due diligence process, we interviewed the CEO, customers, other investors, board members, potential customers, people who decided not to be customers. We also went and visited their locations if they had physical locations that mattered. We got access to all of their inside information such as patents, financials, business plans, and market projections. Then we validated all of those things that we read, conversations we had, and insights that were provided with our own research. I personally did all of the above for Staging and Design Network (SDN) along with a few other people on the due diligence team.

Each week we met over at Davis Wright Tremain and discussed what we learned. The funny thing is that every week it sounded like there were no companies that were investable. Yet as the amount of information grew and we were able to validate components of the businesses, a few began to emerge that were more investable than the others. Some really began to look like they were just too early and perhaps a future Seattle Angel Conference (SAC IV or SAC V) would be a better fit. Some were looked like they weren't committed enough, and others looked great except for a few outstanding questions.

The final due diligence report went out yesterday for each of the companies and I spent most of Saturday working on the SDN report and then most of Sunday reading the other reports. The research and reports are certainly not as in depth as many reports on public companies - such as the PG report from Ackman. Perhaps the goal should be to improve the reports a little, but that would require some level of training the angel investors on how to perform due diligence. I think I have a good sense for the company that I plan to vote for - regardless of whether that team wins, I think the group will ultimately pick a more likely success story than if I had gone about this process on my own.

In the next post (next Monday) in the Seattle Angel Conference III series, I’ll post my thoughts on the whole process including the final conference and thoughts on who won.

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