How Knife Capital's new due diligence platform for startups works
YueDiligence tool to help bridge the information gap between entrepreneurs and investors
There is no secret to getting investor-ready, says Keet van Zyl, if you watch a show like Dragon's Den, investors always ask the same questions - despite this, there continues to be an information gap between entrepreneurs and investors, he adds.
Van Zyl is the co-founder of YueDiligence, a platform that aims to fill this gap. His company, Knife Capital, a South African investment company, last week launched its alternative due diligence platform.
"The lack of access to funding is perceived as one of the top constraints inhibiting the growth of early-stage ventures worldwide, but lack of access to information may be the real reason why not more entrepreneurial ventures get funded," says van Zyl.
The platform aims to reduce this uncertainty. The platform works by assessing gaps in key business disciplines including "funding readiness, growth gaps and due diligence preparedness" for startups.
The web-based tool automates and structures the initial due diligence process (a check on all aspects of the business and team), to capture, analyse, summarise and communicate the commercial potential of a company in an investor-friendly format, enabling users to make informed decisions.
The response to the platform has been positive, says van Zyl, with the government's Technology Innovation Agency (TIA) and the Barclay Tech Lab Africa having bought licenses for the use of the tool.
Here are 9 things you need to know about how the platform works.
- The platform helps post-revenue startups beyond the idea phase, become investor-ready. It is also for those businesses that may not necessarily be seeking funding but are looking to grow.
- The diagnostic tool examines all major functional areas of a business - including strategy, marketing, sales, HR, intellectual property, financial management, legal, soft skills and environmental, social and governance (ESG). A gap analysis report can then be generated outlining where the gaps are, as well as action points/growth recommendations to fill those gaps.
- Startups are also able to generate an indicative company valuation range. This is important as what entrepreneurs think their company is worth is often not the same as an investor, says Van Zyl.
- The platform also offers an active and detailed due diligence checklist.
- The tool operates as a virtual data room for businesses to store critical information with external customers and partners. This can be used by investors to analyse dealflow in a cost-efficient and effective way, whilst identifying gaps to add value to their investments and prioritise investment spending. This information can also be readily accessed by business mentors, incubators and banks.
- A standard 1-year subscription to YueDiligence for startups costs R5 000. The subscription allows companies to update information and improve their ratings over time.
- Corporate plans start from R50,000/ $4,000 for 12 companies allowing investors, incubators and other users who manage a portfolio of companies to customise their own private deal room, aggregate portfolio metrics, benchmark companies and track the impact of value-adding activities.
- Other developments in the pipeline include allowing users to interact with indicative valuation metrics for a better understanding of their value and integrations with third party service providers to extend the offering.
- The founders are launching a platform for idea phase and pre-revenue startups later this year. This is after identifying need for structured support in this phase. The focus of this platform will be on business model development.