The Ins and Outs of OAF Diligence

Scott Sandler - 2017

Getting a group of really smart people together to consider an interesting problem or question is one of the most rewarding things I’ve ever engaged in. When I first joined OAF as an investor back in 2010, I was immediately hooked by the opportunity to be part of the process of deciding what we would invest in. In a don’t-try-this-at-home moment, I was recruited to be a diligence lead at my very first OAF meeting; I’ve never looked back.

It’s pretty obvious that the first goal of OAF diligence is to understand companies well enough to decide whether we want to invest. What’s not so obvious is that we also strive to make it an extraordinarily rewarding experience for all involved. The essence is open, honest, earnest learning and sharing between and among the investors and the entrepreneurs. What we don’t want is for it to feel like an inquisition (or a proctological exam!)

Our approach is to be quick and efficient, and respect everyone’s time. We identify the most important potential issues early, focus on those, and avoid wasting time on obvious or irrelevant details. We assemble a tight team of highly qualified individuals from our investor group, and we identify one (or sometimes two) of them to take the lead and be responsible for the investment from diligence to exit. (This person will often become a member of the board of directors when we invest.) Our process is structured but flexible; there are standard elements, but each effort is customized to the people and the company situation. We can get it done in a few short weeks, or spread it out when entrepreneurs are swamped with business priorities - we apply our version of the hippocratic oath: first, don’t interfere with business!

The need to carefully consider many facets of each business - people, market opportunity, product and technology, business model, operating plan, exit opportunities - make this an inherently tricky problem to solve, with no obvious answers. The stakes are high, but so are the potential rewards for all involved. It’s serious business, but we make sure to have fun doing it!