Is venture capital due diligence genuinely rigorous, or inherently confirmatory of a decision already made?

Stephane Kurgan · Jul 28, 2023

Top investment firms are far more sophisticated and refined machines than they appear from the outside

From inside you see the number and subtlety of criteria that feed decisions and how a diverse partnership combines varied experiences into collective decisions

40:08 Top firms are more sophisticated and rigorous than they appear from outside

Harry Stebbings · Aug 17, 2022

The biggest mistakes in venture investing are the same as in hiring: skipping steps because a domain expert vouched for the founder, skipping references, and pulling in extra people to manufacture confidence

If you need someone else's answer to feel confident in a decision, that says more about you than the decision

32:36 Skipping steps for manufactured confidence mirrors hiring mistakes in diligence

Jordan Van Horn · Aug 17, 2022 · hedged

Maintaining diligence discipline is harder in venture than in hiring because competitive FOMO discourages investors from being the skeptical voice

With four other VCs pitching the founder, you don't want to be the one telling them their baby is ugly

33:05 Competitive fomo discourages investors from playing the skeptic

Jason Lemkin · Aug 9, 2023

VC diligence is always confirmatory — VCs decide they want to do the deal and don't want to hear reasons not to, even from subject-matter experts warning them off

The pace and markups of the boom plus purely confirmatory diligence let it in; and there are many layers — mashed-together ARR months, inaccurate financials, misrepresented gross margins, revenue pulled forward before a raise

45:20 Diligence is inherently confirmatory not genuinely rigorous