A quick start-up evaluation
Start-up evaluation – The decision to invest in a start-up is based on the evaluation of its economic development potential and the associated risks. Investors have tools and methods to carry out this evaluation: market potential, Business model, market access, team strengths and complementarity, financing plan, etc.
An area to be evaluated becomes particularly difficult when it concerns a so-called “Deep Tech” start-up, i.e. one that relies on a recent breakthrough technology in order to offer a differentiated product. The solidity of the technology developed by the start-up becomes a key element in the evaluation, yet the investor is often less well equipped to carry out this evaluation. The decision’s risk is higher, the decision more uncertain and the bet more important.
The investor cannot become an expert in a barely mature technology and can only rely on external competencies to assess its potential and the associated risks.
Open Innovation, a considerable help in the evaluation of a start-up
This is where Open Innovation can play an important role.
Indeed, the very essence of Open Innovation platforms such as ideXlab is to help find and contact experts in recent technology in a fast and efficient way, including in the most recent and cutting-edge fields.
In the case of a so-called “start-up Due Diligence”, a very tight methodology must be put in place in order to quickly provide answers to the investor’s questions: are the benefits of the technology real, what are the controlled and uncontrolled risks, how does the technology fit into a production process and into a broader technological context?
It may seem very difficult to answer these complex questions in a very short period of time. However, the investor often has little time to form an opinion and make a decision.
The steps to follow are: understanding what the start-up’s technology does and what are its main benefits compared to the existing one, understanding the technological, regulatory and industrial context in which it has to fit, identifying the associated risks. This analysis is based on two sets of actors: the start-up on the one hand, which must necessarily collaborate in the analysis, and external experts on the other hand, who must give an independent opinion on a benefit/risk analysis of the technology developed by the start-up.
How to carry out this Due Diligence?
In order to carry out this Due Diligence in a very short period of time, we have developed a methodology based on our platform to gather all the necessary and available knowledge about the start-up’s technology (scientific publications, patents, competitive environment, …), and on the other hand, on a sequence of interviews both internal and external to the start-up in order to quickly come up with a recommendation.
It is possible to conduct such a Due Diligence in five days, even on a completely new and disruptive technology. It can also be conducted in complete confidentiality. This is what we illustrate in the biotechnology case study that you can download below.