Mergers & Acquisition Due Diligence
Social Media Monitoring Platform
- Industry
- Big Data & Social Analytics
- Service
- Accelerated M&A Due Diligence | Code & Architecture Review | Customer Validation | Reference & Financial Audit
Overview
An angel investor asked us to evaluate the risk of a potential investment in a social media monitoring and big-data collection application. A five-person start-up in Tel Aviv had built an innovative data-harvesting platform; the investor needed an impartial assessment within three days before committing to a seed-stage round.
At the time, the technology itself was revolutionary — it collected and organized huge amounts of data for marketers to evaluate consumer mood, sentiment, and affinity using the top social media platforms as an input source. On paper, the platform provided a rich prism into consumers’ online lives. If it performed as advertised, the investor believed in its potential — but he needed assurance the start-up was a safe bet.
Evaluation Criteria
Management Team Credibility
Establish the credibility of the management team and surface any red flags before capital was committed.
Validated Market Need
Understand the real market need for the product through direct customer interviews — not just founder claims.
Code & Engineering Quality
Evaluate the quality of the code base, the skill of the development team, and the processes they followed.
How We Solved It
With an informal due-diligence window of only three days, the goal was to collect as much insight as possible as quickly as possible. Sphere provided an accelerated M&A Due Diligence engagement focused on four pillars:
1. References
In a seed round, the development team is the only true investable asset. References from previous employers were used to understand career longevity, stability, and responsibility — and to uncover potential red flags before the term sheet was signed.
2. Financial
In a seed-stage round, books unencumbered by personal-account intermingling allow investors to make a judgment on financial discipline. We audited the books for clarity, separation, and consistency with the founder’s narrative.
3. Customer Calls
To understand the value of the product, we spoke with multiple beta users. When only positive references were received, we sought references from other customers — surfacing the unfiltered truth about adoption, traction, and product fit.
4. Code Review
The software architecture was scrutinized and a sample of code was examined. The processes employed by the developers were documented, with particular attention to scalability, security, and maintainability of the data-collection pipeline.
Delivery
With this information collected, a fast report detailing findings and concerns was delivered to the investor — on time, in three days.
The Results
The findings and recommendations contained in the report convinced the founder that his valuation expectations were too high. With an understanding reached, the angel investor funded the seed-stage round on terms that reflected the validated reality of the business.
