Technology Due Dilligence

Investors use due diligence to help them understand the relative risks and rewards inherent in potential investments. Where the potential investment is in technology businesses or technology dependent businesses, traditional, finance-based due diligence alone rarely provides sufficient evidence and assurance, even for investors with strong stomachs. Many investors do not feel comfortable with technological issues, most technologists have little or no experience in finance and business management, and many financial advisors do not understand technology. The result all too often is poor risk assessment, high "hurdle" rates of return on technology ventures, and good ideas either not being supported or being poorly developed. As the leading risk/reward professional practice, Z/Yen offers technological due diligence for potential investors in technology based ventures.Meaningful technological due diligence requires soft analysis and judgement as well as hard, objective assessment. Z/Yen employs a mixture of numeric and qualitative techniques in our proprietary risk/reward methodology, such as:

  • Risk analysis of the new product development process of a leading computer games developer, using ‘Delphi’ methods, including expert panels;
  • Calculating the costs of capital and desired rates of return in a volatile sector of the European chemical industry, using stochastic modelling of multivariate outcomes;
  • Project managing a new commercial service in dynamic design, using ‘checkpoint-staging’ methods of planning for risk reduction;
  • Evaluating a technology-based commercial concept for a major City of London financial exchange, using algorithmic modelling of trading to assess market risk and mixing qualitative analysis of risk areas with quantitative credit and ratings data risk.

Z/Yen people bring a variety of technical, academic and business experience with qualifications in science, information technology, law, economics and accountancy.

Z/Yen has access to specialists upon whom we draw on an ad hoc basis. For example, we have recently drawn on scientists from the defence industry, academics from City University, wireless security experts and researchers from St Bartholomew’s Medical School.

At Z/Yen, we believe that technology commercialisation is a management process like any other. There are generic issues to manage, irrespective of the actual technology under study. These issues can be analysed, and the relative risks and rewards of the prospective investments can be assessed and compared with previous experience, both qualitatively and quantitatively. Some of the key benefits can include:

  • Turning technical capabilities into attractive product concepts;
  • Proof of concepts and rejecting duds (avoiding poor investments);
  • Improving success rates and likely financial outcomes (committing to good investments and improving marginal investments);
  • Understanding the appropriate capital requirements for investments (in a recent case we showed that the client could achieve its aims with a much lower capital base than it thought).

Z/Yen’s risk/reward methodology enables us to supplement financial due diligence with analysis of science, markets and technology, straddling and helping to explain both of these uncertain worlds. Technology investments tend to offer high risk with potentially high rewards; Z/Yen’s work does not eliminate the risk but helps our clients to understand the potential risks and rewards and to increase their success rates.

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