Tech Due Diligence from a CTO’s perspective

- The Workshop

Chris Philipps cphilipps@me.com

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Chris Philipps

• Tech Advisor for Startups and VCs

• Interim CTO since 2010• Agile Enthusiast since 2008• Tech since 2000

Chris Philipps

• Tech Due Diligence since 2010 • Roles:

• “CTO under DD”• Reviewer• Sparring partner for CEOs & CTOs (Test runs / DD support)

• Performed dozens of DDs from 100k seed/angel up to 40M Series C round

What about you?

How it all began (or: /me in 2010)

• dramatically unprepared • no clue what’s going on • we probably got the funding *despite* me, not because of me

… and so are many CTOs in 2016

AGENDA

• What is a DD - and what isn’t? • Different stages of funding • Investors’ expectations • Chris’ approach • DD-related documents • Typical red flags • Your skeletons in the closet

• (War Stories: The good, the bad and the ugly)

• Q&A

What is a DD (and what isn’t)

• A DD is a general health check

• Identification of assets and risks

• Evaluation of

• Leadership

• Team

• Technology

http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg

A DD is highly collaborative work• A first test for

• common understanding

• trust

• dealing with conflict

• BONUS: It is the most honest and thorough feedback you can get

http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg

It is NOT: *• hide-and-seek

• us against them

• a show

* at least it shouldn’t be. Well, not entirely.

http://www.amusingtime.com/images/09/funny-joker-monkey-picture.jpg

Different stages of funding

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Different stages of funding

Stage: Seed / Angel Biz Focus: Build DD Focus: Potential

Stage: Series A,B,C Biz Focus: Fast, massive growth DD Focus: Scalability, ability to change quickly

Stage: Series DBiz Focus: Expansion (e.g. merger) DD Focus: Maturity

Stage: IPO ?

Different stages of funding

Stage: Seed / Angel Biz Focus: Build DD Focus: Potential

Stage: Series A,B,C Biz Focus: Fast, massive growth DD Focus: Scalability, ability to change quickly

Stage: Series DBiz Focus: Expansion (e.g. merger) DD Focus: Maturity

Stage: IPO ?

Investors’ Expectations• Ability to grow and scale

• Ability to change

• Leadership and team skills

• Risk assessability

https://shechive.files.wordpress.com/2015/12/kittens-doing-very-human-ish-things-15.jpg?quality=100&strip=info&w=600

• No standard for Startup Tech DD’s (yet)

• Very different approaches

http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg

Chris’ DD Approach

http://assets.worldwildlife.org/photos/1456/images/story_full_width/White_Rhino_8.7.2012_Threats_HI_102787.jpg?1345545643

Chris’ DD Approach

• It starts with the intro

• It is not only about WHAT but also about HOW

• Big picture and context

• Gut feeling IS a valid indicator!

https://shechive.files.wordpress.com/2015/12/kittens-doing-very-human-ish-things-15.jpg?quality=100&strip=info&w=600

Chris’ DD ApproachRecap: Main questions

• Is the company able to grow / scale? • Is the CTO (CPO) able to provide great

leadership? • Is the team motivated and highly

skilled? • Are they able to (fail and) learn quickly? • What are main complexity drivers? • What are major challenges and risks?

https://shechive.files.wordpress.com/2015/12/kittens-doing-very-human-ish-things-15.jpg?quality=100&strip=info&w=600

Review Topics:• Company view

Review Topics:• Company view • Product

Review Topics:• Company view • Product • Technical leadership

Review Topics:• Company view • Product • Technical leadership • Development process

Review Topics:• Company view • Product • Technical leadership • Development process • Hosting

Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment

Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture

Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture • Quality Assurance

Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture • Quality Assurance • Stakeholder collaboration

Review Topics:• Company view • Product • Technical leadership • Development process • Hosting • Deployment • Software architecture • Quality Assurance • Stakeholder collaboration • Company culture and tech ecosystem

Optional Topics:

• Data Analysis / Business Intelligence • Data Science / Machine Learning • R & D • Compliance: Data security, Privacy, etc. • Internal IT • Hiring • …

Involved People:

CEO / founder(s)

CTO

Head of Engineering

CPO

Head of Product

Product Owner(s)

Scrum Master(s)

Agile Coach

Project Manager(s)

Mobile Engineers

Software Engineer(s)

Operations Engineer

DevOps

QA

Test Engineer(s)

Security Engineer

Data / BI team

Selected stakeholders such as Customer Support, Marketing, Sales

Internal IT

DataScientist(s)

Involved People:

CEO / founder(s)

CTO

Head of Engineering

CPO

Head of Product

Product Owner(s)

Scrum Master(s)

Agile Coach

Project Manager(s)

Mobile Engineers

Software Engineer(s)

Operations Engineer

DevOps

QA

Test Engineer(s)

Security Engineer

Data / BI team

Selected stakeholders such as Customer Support, Marketing, Sales

Internal IT

DataScientist(s)

https://cdn.meme.am/instances/53541325.jpg

Prepare your Team

• Give them context • State importance of DD • Eliminate fear • Give clear guidelines regarding

disclosure of information • “Challenges instead of problems”

Review Format:

• 1:1 Interviews • Group Interviews (e.g. dev teams) • Standup or Planning Meetings • Whteboard discussions (e.g. architecture) • Documentation Review • Code Walks / Code Samples • Live samples (e.g. from CI or monitoring tools) • Actual usage of the product

Examples of Questions• What are your principal concerns with respect to the business? What

keeps you awake at night? • Describe your software architecture incl. 3rd party components,

technology stack, communication protocols • What is the highest risk in your tech landscape and how do you plan to

tackle it? • Which changes would you apply to your current architecture if you had

to scale from n (unique visitors / transactions / requests / …) to 2*n / 5 * n / 20 * n?

• Can you explain the reasoning behind the choice of XY? Why didn’t you [make / buy] it?

• Can you describe your role and responsibilities as CTO?

DD Documents

• See “Checklist DD Docs” - Exercisehttp://www.pd4pic.com/images/collared-peccary-pig-gray-sleeping-sleep-animal.jpg

Typical Red Flags / Antipatterns• Lack of transparency and collaboration

on the DD

• Lack of tech strategy

• Not knowing the business perspective

• Lack of delegation

• Not-invented-here (NIH) syndrome

• Focus on problems rather than solutions

• Underestimates hiring talent

https://media.licdn.com/mpr/mpr/AAEAAQAAAAAAAAe-AAAAJDIyOGU4MGE2LWNmMmItNGYxMS04ZWRjLTUxMDIzMjExODQ3ZA.jpg

Typical Red Flags / AntipatternsLeadership (covered)

Technology

Product

Data

Process

=> Your turn! https://media.licdn.com/mpr/mpr/AAEAAQAAAAAAAAe-AAAAJDIyOGU4MGE2LWNmMmItNGYxMS04ZWRjLTUxMDIzMjExODQ3ZA.jpg

Your Skeletons in the Closet

http://www.berliner-zeitung.de/image/1236966/2x1/940/470/991b35395e50d9775ce05607dd228984/vZ/

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Your Skeletons in the Closet

• Relax: EVERYONE has them!

• Adress them proactively

• Provide a plan how to tackle them (problem awareness and problem solving skills are way more important than problems)

[ The Good, the Bad and the Ugly]

http://www.gablescinema.com/media/filmassets/slides/The_Good_the_Bad_and_the_Ugly_1.jpg

Q & A

Want to collaborate?

=> Looking for collaborators on Startup Tech DD framework / standard

cphilipps@me.com

Thanks!

Questions?cphilipps@me.com

Xing: https://goo.gl/aLH26oLinkedIn: https://goo.gl/9mCUQX

Twitter: @chphilipps