Businesses go through various assessments in their life cycles. These evaluations (e.g., granting of work permits, partnerships, investment advisors, and investors) have different sets of filters that technology start-ups must pass to be considered feasible. The assessment process gets more challenging for deep tech projects leveraging cutting-edge technology, like blockchain, machine learning, and AI.
This is a series of questions structured into three parts for start-ups to scrutinize their investment readiness and prepare for the due diligence process. Part I shall cover the technical considerations, Part II shall address the legal aspect, and Part III shall tackle the business considerations.
In Part I of this series, we shall begin with the general questions and then dive deeper into industry-specific questions to explain the nuances and snares a tech start-up might encounter in its life cycle.
Is the proposed solution technically practical?
This question sounds obvious. However, many founders neglect it while pursuing their visionary technological dreams, particularly in deep-tech industries, such as blockchain technology. If you only have a theoretical concept at hand, ensure that you can practically demonstrate it before pitching it.
If the project is only theoretically available at the moment, how much time and effort do you need for R&D? Do you have time and funding limitation projections at hand?
In some instances, the team may be competent, and the concept very promising. Still, it might take several years to fully develop and implement it- like quantum computing for addressing enterprise-grade problems in the medical field.
It would be best if you were realistic and honest about the timing and expenses to avoid losing investor trust. You must differentiate between research and the general software development expenses: the research phase involves the invention of algorithms to create something that previously has not been possible because of technological barriers, with uncertain outcomes and timelines. On the other hand, the software development phase entails creating a well-understood solution, which only demands a specified period.
Obviously, projects at the research stage are much less foreseeable. But development can also take longer than the original plan. Ensure you professionally communicate any delay, or prompt to investors to avoid pullbacks.
In the case of a software product, does your project really require proprietary software and not a white-label solution or SaaS?
Reinventing the wheel might be attractive to the eyes. Nevertheless, sometimes pouring resources into the development of a new in-house technical solution turns out to be a waste of time. If a software solution is not part of your plans, it will be more comfortable and cost-effective to buy a readymade technical solution and customize it to fit your business needs.
If you are handling a blockchain project, why do you want to distribute the database? In other words, why do you need blockchain?
After studying several projects, tech analysts have concluded that most problems claimed to be solved with blockchain technology can be addressed with a more straightforward cryptographically protected database with a robust permission management system that can also leverage public-key cryptography if needed.
In the case of an original blockchain idea, the database is distributed among various members, with all of them capable of making an input. However, this is not always the case. For instance, a business may require a database to store and process its internal data, which does not require external distribution. Alternatively, it can be a database belonging to a governmental establishment, where citizens should have access to, but only the government should authenticate input data.
How is cybersecurity ensured?
Cybersecurity is a significant feature of any IT infrastructure, particularly for a regulator, whose primary concern is protecting consumers. You should categorically layout your security measures to gain investor trust.
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