Creative Destruction: Due Diligence – how much do you do?

The creative production process relies on an entrepreneur taking something new or innovative to the market place and making a real difference to our lives.

Previous articles have been written about different markets where there will be a number of alternative “new” options, where there will eventually emerge one or two serious contenders. For instance in the heating market and wood pellets, the question has not been answered yet.

Part of the process of market making involves making relationships, and in commerce this involves the transfer of goods and services and fees via an agreement.

The question of due diligence often arises, or the slightly murkier cousin “trust me!”. Undertaking research on someone or a company can be uncomfortable, could be costly, time consuming and ultimately unnecessary. Not undertaking any research can be very costly in some situations.

Step 1 The basic research

Make sure the company or the individual is traceable, and do look for some history. For instance even solicitors or former solicitors can have a past.

Tip: http://www.lawgazette.co.uk/archive/view=query.law

gives you an online archive in the UK for news on Solicitors. This one is free, and there are others for other proffessions and trades.

Why?

Individuals often repeat their behaviour, although we have serial entrepreneurs, you can have serial offenders.

Step 2 The basic trust

You can also network, and network in someone else's network. Find out who they mix with, what other people say about them. Even better, you may find someone in your network that can speak for them. If you cannot, then think about whether you want to proceed to step 3.

Step 3 The more advanced trust

Should you experience each others product or service at a level where you can afford to loose, before you decide to scale.

All the above sounds good – but time consuming. The venture capitalists seem to do it quicker through making sure that the team stands up to scrutiny and that you deal at the right level. Unfortunately how you get from being on your own to being amongst a team of recognisable and highly talented people is not so obvious. Take some comfort from the fact that many VC investments don't work out. Many Hi-Tech teams split up. It does seem to be an iterative process, and you have to keep learning along the way.