VC Cliche of the Week

I have bought probably ten cars in my life and have never actually kicked the tires. 

But the visual of a guy walking around the car, checking it out, kicking the tires, is one that has contributed a classic cliche to the VC vernacular.

Due diligence is a critical part of the venture process. No matter how well you know the market and the entrepreneur, there is nothing better than the due diligence process to help you make the go/no-go investment decision.

And my favorite part of the due diligence process is kicking the tires.  By that I mean going to visit the company, meeting all the people involved, seeing how the place operates, the vibe, whether people are up walking around and talking to each other, or closed up in their cubes staring at their computers.  I like to see smiles on the faces and laughter in the halls.

Of course any company can put on a good show for one day, and I suspect they all do that at some level.  But kicking the tires is a very important thing to do regardless of how much shine has been applied.  The hubcaps can still fall off at any time and I’ve seen some crazy stuff happen in company visits that has given me pause about making an investment.

When people don’t get along and have trouble working together, it can’t really be hidden very well.  When people aren’t happy in a workplace, you can smell it.  And we are usually investing in companies that are between 5 and 25 employees.  At that size, culture and communication is critical and its pretty easy to tell if a company is working well togehter or not.

So when you think about making an investment the next time, make sure to kick the tires.  And if the hubcap pops off, pay attention.