tech due diligence in a startup - workshop
TRANSCRIPT
Tech Due Diligence from a CTO’s perspective
- The Workshop
Chris Philipps [email protected]
powered by
Chris Philipps
• Tech Advisor for Startups and VCs
• Interim CTO since 2010• Agile Enthusiast since 2008• Tech since 2000
Chris Philipps
• Tech Due Diligence since 2010 • Roles:
• “CTO under DD”• Reviewer• Sparring partner for CEOs & CTOs (Test runs / DD support)
• Performed dozens of DDs from 100k seed/angel up to 40M Series C round
How it all began (or: /me in 2010)
• dramatically unprepared • no clue what’s going on • we probably got the funding *despite* me, not because of me
… and so are many CTOs in 2016
AGENDA
• What is a DD - and what isn’t? • Different stages of funding • Investors’ expectations • Chris’ approach • DD-related documents • Typical red flags • Your skeletons in the closet
• (War Stories: The good, the bad and the ugly)
• Q&A
What is a DD (and what isn’t)
• A DD is a general health check
• Identification of assets and risks
• Evaluation of
• Leadership
• Team
• Technology
http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg
A DD is highly collaborative work• A first test for
• common understanding
• trust
• dealing with conflict
• BONUS: It is the most honest and thorough feedback you can get
http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg
It is NOT: *• hide-and-seek
• us against them
• a show
* at least it shouldn’t be. Well, not entirely.
http://www.amusingtime.com/images/09/funny-joker-monkey-picture.jpg
Different stages of funding
http://awsassets.wwfmz.panda.org/img/original/rhinos_1.jpg
Different stages of funding
Stage: Seed / Angel Biz Focus: Build DD Focus: Potential
Stage: Series A,B,C Biz Focus: Fast, massive growth DD Focus: Scalability, ability to change quickly
Stage: Series DBiz Focus: Expansion (e.g. merger) DD Focus: Maturity
Stage: IPO ?
Different stages of funding
Stage: Seed / Angel Biz Focus: Build DD Focus: Potential
Stage: Series A,B,C Biz Focus: Fast, massive growth DD Focus: Scalability, ability to change quickly
Stage: Series DBiz Focus: Expansion (e.g. merger) DD Focus: Maturity
Stage: IPO ?
Investors’ Expectations• Ability to grow and scale
• Ability to change
• Leadership and team skills
• Risk assessability
https://shechive.files.wordpress.com/2015/12/kittens-doing-very-human-ish-things-15.jpg?quality=100&strip=info&w=600
• No standard for Startup Tech DD’s (yet)
• Very different approaches
http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg
Chris’ DD Approach
http://assets.worldwildlife.org/photos/1456/images/story_full_width/White_Rhino_8.7.2012_Threats_HI_102787.jpg?1345545643
Chris’ DD Approach
• It starts with the intro
• It is not only about WHAT but also about HOW
• Big picture and context
• Gut feeling IS a valid indicator!
https://shechive.files.wordpress.com/2015/12/kittens-doing-very-human-ish-things-15.jpg?quality=100&strip=info&w=600
Chris’ DD ApproachRecap: Main questions
• Is the company able to grow / scale? • Is the CTO (CPO) able to provide great
leadership? • Is the team motivated and highly
skilled? • Are they able to (fail and) learn quickly? • What are main complexity drivers? • What are major challenges and risks?
https://shechive.files.wordpress.com/2015/12/kittens-doing-very-human-ish-things-15.jpg?quality=100&strip=info&w=600
Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment
Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture
Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture • Quality Assurance
Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture • Quality Assurance • Stakeholder collaboration
Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture • Quality Assurance • Stakeholder collaboration • Company culture and tech ecosystem
Optional Topics:
• Data Analysis / Business Intelligence • Data Science / Machine Learning • R & D • Compliance: Data security, Privacy, etc. • Internal IT • Hiring • …
Involved People:
CEO / founder(s)
CTO
Head of Engineering
CPO
Head of Product
Product Owner(s)
Scrum Master(s)
Agile Coach
Project Manager(s)
Mobile Engineers
Software Engineer(s)
Operations Engineer
DevOps
QA
Test Engineer(s)
Security Engineer
Data / BI team
Selected stakeholders such as Customer Support, Marketing, Sales
Internal IT
DataScientist(s)
Involved People:
CEO / founder(s)
CTO
Head of Engineering
CPO
Head of Product
Product Owner(s)
Scrum Master(s)
Agile Coach
Project Manager(s)
Mobile Engineers
Software Engineer(s)
Operations Engineer
DevOps
QA
Test Engineer(s)
Security Engineer
Data / BI team
Selected stakeholders such as Customer Support, Marketing, Sales
Internal IT
DataScientist(s)
https://cdn.meme.am/instances/53541325.jpg
Prepare your Team
• Give them context • State importance of DD • Eliminate fear • Give clear guidelines regarding
disclosure of information • “Challenges instead of problems”
Review Format:
• 1:1 Interviews • Group Interviews (e.g. dev teams) • Standup or Planning Meetings • Whteboard discussions (e.g. architecture) • Documentation Review • Code Walks / Code Samples • Live samples (e.g. from CI or monitoring tools) • Actual usage of the product
Examples of Questions• What are your principal concerns with respect to the business? What
keeps you awake at night? • Describe your software architecture incl. 3rd party components,
technology stack, communication protocols • What is the highest risk in your tech landscape and how do you plan to
tackle it? • Which changes would you apply to your current architecture if you had
to scale from n (unique visitors / transactions / requests / …) to 2*n / 5 * n / 20 * n?
• Can you explain the reasoning behind the choice of XY? Why didn’t you [make / buy] it?
• Can you describe your role and responsibilities as CTO?
DD Documents
• See “Checklist DD Docs” - Exercisehttp://www.pd4pic.com/images/collared-peccary-pig-gray-sleeping-sleep-animal.jpg
Typical Red Flags / Antipatterns• Lack of transparency and collaboration
on the DD
• Lack of tech strategy
• Not knowing the business perspective
• Lack of delegation
• Not-invented-here (NIH) syndrome
• Focus on problems rather than solutions
• Underestimates hiring talent
https://media.licdn.com/mpr/mpr/AAEAAQAAAAAAAAe-AAAAJDIyOGU4MGE2LWNmMmItNGYxMS04ZWRjLTUxMDIzMjExODQ3ZA.jpg
Typical Red Flags / AntipatternsLeadership (covered)
Technology
Product
Data
Process
=> Your turn! https://media.licdn.com/mpr/mpr/AAEAAQAAAAAAAAe-AAAAJDIyOGU4MGE2LWNmMmItNGYxMS04ZWRjLTUxMDIzMjExODQ3ZA.jpg
Your Skeletons in the Closet
http://www.berliner-zeitung.de/image/1236966/2x1/940/470/991b35395e50d9775ce05607dd228984/vZ/
verrueckte-jobs-berufe-arbeit-arbeiten-ausgefallene-schraege-skurrile-ungewoehnliche--.jpg
Your Skeletons in the Closet
• Relax: EVERYONE has them!
• Adress them proactively
• Provide a plan how to tackle them (problem awareness and problem solving skills are way more important than problems)
[ The Good, the Bad and the Ugly]
http://www.gablescinema.com/media/filmassets/slides/The_Good_the_Bad_and_the_Ugly_1.jpg
Want to collaborate?
=> Looking for collaborators on Startup Tech DD framework / standard
Thanks!
Xing: https://goo.gl/aLH26oLinkedIn: https://goo.gl/9mCUQX
Twitter: @chphilipps