Alpha Start-up Due Diligence
Part 4: Financial
For investors, lack of data is one of the most adverse problems when analysing an early-stage start-up, but we are aiming to solve this via our forward thinking, tech-centred solution, i3D Protocol. The i3D Protocol offers investors the opportunity to do this as well as partake in community consensus decision making. As part of our mission to offer better due-diligence access to investors, we have created a series of articles to examine core areas that are essential to a healthy due diligence process: Idea/Product, Team, Market, Competition, Business Model/Financial, and ESG
In this fourth article we’re going to focus on the Financial aspects of the project as this is ultimately where an investor will be able to gauge their investment returns.
Context
The review of the Business Model & Financial section is cross cutting sectional, aiming to examine how the solution provided by the company will offer a return to investors. A deeper dive into the financial statements (if available) of a company should take place prior to any substantial investment into a company.
Key questions an investor should consider while doing their own research
- Is the Business-Plan/Whitepaper well formulated with careful thought?
A business plan or whitepaper sets out in a written document the strategy for the Idea or Product and how the Company will execute to achieve goals. It includes all aspects that would allow an investor to make an informed decision if they were reading the document themselves.
- Is there Confidence Funding?
The company may have existing shareholders/investors who have committed funding. This is a ‘confidence indicator’ for prospective investors
2. Are Revenue Streams clearly identified?
The main sources of recurring revenue (or fees) and timelines over which they will be received are identified. For Crypto projects external revenues indicate a higher score
3. Is a strong Financial Team/CFO identified?
Company money managers should be appropriately qualified, experienced, and credible
4. Is there a breakdown of how funding will be deployed to achieve market development/monetization of product?
If it is a Capital-intensive or decentralized project, it will usually have a longer time to market, and funding and projected revenues need to provide for this. Score higher if you believe funding is efficiently deployed.
5. Is the Tokenomics favourable to Community?
Too large a token holding by Team or VC means that liquidation could cause a material change in price or result in a Rug Pull
6. Is there a clear token Vesting Period for Team and VC?
Tokens for Team & VC should be vested over time to ensure liquidation of them does not materially affect the price
7. Is funding locked in Escrow until Development Milestones are achieved?
Free access to funding by a team without achievement of milestones places greater risk on investor’s funds
8. Does the Company identify possible Strategic Partnerships with Supply Chain and Partners to add value to the ecosystem in which it operates?
This demonstrates a key understanding of the ecosystem and associated supply chain in which the company operates
9. What is your gut-feel on how risky an investment in the company is?
A low score indicates high risk, a high score indicates low risk. This is about understanding the risk capital on the table and the risk appetite for an investor.
How does the i3D Protocol use Network Effects to solve the problems in Alpha Due Diligence
In distributed intelligence systems, and particularly in due diligence, both “skin in the game” and reputation management are needed to ensure that workers are doing their utmost to strengthen the network and build its credibility. Invluencer is creating a reputation stakeholder economy based on gamification: the i3D Protocol powered by i3D Tokens. Stakeholders include investors who subscribe (via a utility NFT) for business intelligence and create a liquidity pool for experts to complete scoring of opportunities, and experts who purchase and lock up tokens to allow them access to opportunities to earn from the liquidity pool. Investors can be both an investor and expert, thus having the opportunity to earn back their subscription.
Methodologies include the triangulation of data points from the products of Invluencer: i3D Arena (an Inner Swarm of Expert analysts), i3D Rapid App (a greater network of Outer Swarm analysts) and a technical component based on studies of success factors. In an ideal scenario the triangulation of data points allows for the technical algorithms to be fully developed into an automated predictive model.
Through its utility i3D Angel NFT for access control, the protocol grants access to investors to the data generated within the protocol and allows for governance based voting on the top projects to invest in through a Upsilon Token (Dry Powder Mining Fund). The Upsilon Token is initially seeded via a TGE (Token Generation Event) of the i3D Token in a public sale with the protocol being the first client of the Fund. Yields are available to the i3D Treasury to pay the network and create growth.
More information available in our Whitepaper
Very importantly, the above is not financial advice and is a snapshot of the processes we run. You should DYOR!
You can reach out to us on any of our social media channels:
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Need more detail?
Main site: Invluencer
i3D Angel Minting site: i3D Angels
