Most early-stage non-institutional startup investors are flying blind, writing checks with little information, data and insights.
StartupFactCheck uses a vast array of data sources, AI/ML tools and industry-specific data sets to give investors unique and proprietary insights into teams and companies.
StartupFactCheck produces an 8 to 12-page screening and due diligence report, pulling from more than 30 specialized and inaccessible sources of data and analytics, on any tech startup in the United States. The report includes due diligence, team insights, TAM verification, deck verification, deep research and insights supported by data science. It may include much more information, including background checks, customer interviews and more.
Benefits Of Having Additional Information
Better negotiating position
By having more information on the state of the team, the status of the product, any potential red flags and the resources the company will really need to succeed, investors can negotiate better terms with the startups they are looking to invest in (including downside protections and valuations).
PREVENT herd MENTALITY
Most lead angel investors don't screen and perform due diligence on startups in any systematic and codified manner. They are not obligated to do so by any laws, codes or guidelines. As a result, people who follow leads into startups without doing their own screening and due diligence often end up losing money (especially since not all investors' interests are aligned).
Identify biases and fallacies
Our reports allows you to prevent cognitive biases, including anchoring bias, confirmation bias, survivorship bias, hot-hand fallacy and sunk cost fallacy, among others, to hijack your judgment in selecting startups to invest in.
Make sure the startup and the founding team is not misrepresenting its position or providing false information in the pitch deck, on-line profiles and other collateral provided by the startup.
Unique Insights In Our Reports
Our reports can answer the following questions and many more about the startup you're considering making an investment in.
Is the team dedicated to building a company large enough for follow-on funding to be available? Are the team's interests aligned and what are the chances of them not falling out (teams falling out is the #1 reasons startups fail)? Do the founders have the skills needed to build the company and/or the awareness that they need to outsource or hire for this? What in the founders' biographies indicates that they are true entrepreneurs? Does the team believe in diversity? What indications are there out there that the founders are leaders?
Does the startup have the ability to serve the market? (the market exists, but can the startup sell to it). How is the total addressable market calculated? Are the founders aware of what it will take to sell to that market (CAC, LTV, unit economics, etc.). Does the market want to buy what the startup is selling (either from the startup or at least from its competitors)? Is the market contracting or expanding?
and much, much more.
Have people on the team ever built real product (as opposed to doing professional services or ecommerce)? Is the company presenting a product, a MVP, a mockup or a wireframe? Do they know the difference? If the team has B2B product experience are they building a B2C app? How does the team know how much it will cost to build the product? If the company is doing enterprise tech or hardware does the team have enough awareness to know what they need?
Do the customers the startup claims to have exist? Are they healthy companies that should be around for years to come? How many of the customers the company claims to have are unaffiliated (were not acquired through personal legacy connections)? What are the sales cycles to these clients? Who are the real buyers?
do they have a chance of getting to an a?
First-money investors, including angels, microfunds and alternative investors are just first in what usually is a long cycle of fundraising rounds. Early-stage investors will usually lose everything if they don't get to an A-round. Does the team have the skills, grit, perseverance and leadership to be around long enough to get to an A round? Are the financial projections realistic and can they support the trajectory?
Are the founders all full-time in the startup even if they say they are? Is it still possible to protect the unprotected IP? Are the founders hungry and do they really care if they win or not? Are the founders aware of what it will take to get to a positive outcome? Do the people the founders claim will work for them know about the intent?
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Key Data Sources We Pull From
StartupFactCheck's analytics and due diligence reports focus on 3 or 4 fundamental sources of information.
There are about half a dozen large-scale professional databases and analytical tools that provide investors with deep insights into a startup and a startup team. However, most of these tools, even individually, are prohibitively expensive to the individual or casual investor, not to mention in aggregate. StartupFactCheck provides insights and information from these sources in a cost-effective manner.
artificial intelligence, machine learning, big data and other tools leveraged + repurposed specifically for startup investing
There are dozens of tools available online that can provide investors with additional data and information on the companies and teams they are looking to invest in. Most of these tools have use cases outside of startup investing, including legal analytics, marketing analytics, jury selection, recruitment and retention, but are very useful in providing actionable insights to investors.
tedious and time consuming manual research
Sometimes the only way to learn more about a company and its founding team is to dig deep using good old online and offline research. We use a variety of search and research methodologies to unearth pertinent information about the startup, its competitors, its market and technology.
upon request: interviews and work with the startup itself
Sometimes the investor doesn't want to break glass and wants to protect her or his relationship with a startup by using a third party to ask the difficult due diligence and screening questions. We can be hired to ask the hard, uncomfortable questions and work with the startup directly during the DD process.
Origin Story & Founder
Jakub Kostecki has seen more than his fair share of small businesses and startups spreading misinformation, outright lying in their pitch decks and engaging in fraudulent behavior over the course of his 20+ year entrepreneurial community. His guiding principal is that the same behaviors we see in the corporate world and in our private lives (including deception, misrepresentation, lying, fraud, etc.) are visible in the startup world, sometimes even amplified because the high-stakes and high-speed nature of the industry. Intent on protecting investors from startups formed for the sole purpose of affording the founding team an interesting life experience, as well as those who are simply not self-aware, Jakub leverages his 20+ years of entrepreneurial experiences in professional services and his involvement in several startups, mostly in oil & gas tech, to ask the hard questions you may often not ask.
Having spent several years in executive recruitment in the mid 2000's, Jakub knew that more than 50% of all job applicants lie on their resumes. He decided to test the hypothesis that at least as many startup founders lie in their pitch decks, one-pagers and executive summaries. He discovered that a vast majority of startups provide investors with information that is not complete, outdated, unverified or simply not true. This was verified when Jakub worked with several startup teams in Silicon Valley in 2014 and noticed that many of them were raising under false pretenses.
In his former life, plagued by addiction, mental health issues and associated legal trouble, Jakub has engaged in similar behavior. This experience and retrospection has allowed him, after many years of growth and personal work, to be able to identify bad actors, bad behaviors and improper practices that they engage in.
Combining Jakub's unique perspective, experiences, proprietary methodologies and third-party technology, StartupFactCheck is able to engage with deep curiosity, discerning what is real and what is not in the startup world quick and easy and allows investors to limit making money losing bets.
Examples Of Some Of The Falsities We Have Uncovered*
A B2B startup had 20 users, not clients. Of those 20, 7 could be considered clients (had paid or were paying). 13 never paid nor had any intention of ever paying. Of those 7 3 were clients who were friends of the founders and had no intention of being full-time clients. Of the 4 unaffiliated clients 1 was about to go out of business and one had cancelled her subscription days after signing up. In reality, the startup really had 2 clients, which of course affected its CAC and LTV metrics dramatically.
The team who wrote this in their deck still had no product. They assumed it would cost $50k to build. They had never independently built a product in the past. They had no experience in managing product nor in having it built by an offshore software dev shop. Their funding assumptions were not based on anything real, but on the comps of other startups. It was later estimated that it would take at least $300k to build the product. Investors were able to ask more in-depth questions and identify these and other key issues.
The two folks that the founders claimed will join them did entertain several initial hiring conversations, but had not heard from the founders in months and had no intention of joining the startup.
* Some of these case studies are composites of actual case work performed by our team, but all represent authentic issues that we have identified in vetting startups for investors
Dive Deep Into The Information Provided By Your Prospective Investment
Reach out to us if you are looking to invest in a startup and you're worried that you don't have access to enough information about the startup or team. We'll be happy to help.