Due diligence

Deep Due Diligence: Tools, Teams and Case Studies with Marc

Decamillionaire Fireside Chat: Due Diligence Tools, Strategies and Case Studies | Marc Halpern

Private investors who want a clearer due diligence process, and sponsors who want to know how a careful investor screens deals and vets them.

Quotes from the session

Summary

Marc sees about 400 deals a year and invests personally in four. To cope, the Deep Due Diligence Investors Club runs each private placement offering through an AI deal screener first. A score of 70 means the deal gets posted, and only then does the club study the sponsor. Marc says he looks at the jockey, the horse and the track, meaning the sponsor, the opportunity and the macroeconomics.

Richard C. Wilson hosts the chat. Marc explains that deep due diligence lowers risk but cannot remove it, which is why he also uses diversification. He describes team reviews by members from many fields, a 1987 deal that failed after the Soviet Union fell, and how he tests sponsors on their choices during the 2022 and 2023 rate increases. He also gives a short tip for sponsors at events.

Key facts

• The Deep Due Diligence Investors Club has over 58 members and has put about $10 million of equity checks to work.
• Marc sees about 400 deals a year and personally invests in four of them.
• Marc spreads his personal investments across 15 asset classes and aims for at least 10 asset classes and 10 sponsors.

General education only. Not legal, tax or investment advice.

Talk to a securities attorney to explore options around private placement offerings, retirement account investing and sponsor agreements. Do not use AI to write your own legal agreements.

5 key takeaways

1. Judge the jockey, horse and track. Marc looks at three things in every deal. These are the sponsor, the opportunity and the macroeconomics. He says two out of three is not good enough.
2. Screen the deal before the sponsor. Vetting a sponsor takes a huge amount of time, while a deal can be screened in seconds. The club uses an AI deal screener and posts any deal that scores 70. This removes personal bias from the first pass.
3. Minimize risk, then manage it. Deep due diligence minimizes risk and diversification manages it. Marc gives an example of 50 possible risk factors. Regular diligence might find 30 of them, and deep diligence might find 45.
4. Review deals as a team. Members include an airline pilot, an ecologist, a stem cell researcher and an IT specialist. Each person covers the blind spots of the others. Marc says his own performance went up after he began working in teams.
5. Test sponsors on past adversity. Marc asks how sponsors reacted when the Fed raised rates from March 2022 to July 2023. He wants specific deals and decisions. He will not invest with a sponsor who kept offering deals in late 2022 mainly to generate fees.

Related questions

• How do I close a funding round?I close a funding round by focusing on investors who fit the opportunity and moving each interested prospect through clear, consistent follow-up.
• What documents do investors request during due diligence?Prepare a clear, organized package covering your operations, investments, compensation, team, and track record.
• How do I raise capital for my business?I raise capital by building a repeatable system for attracting the right investors, establishing credibility, and developing relationships before asking for money.

Questions about this video

Put this into practice with the family office fit check. See all due diligence resources.