European venture capital firm: delivering commercial due diligence

The Challenge

Across financial services, the subject of CBDC and DLT has become an area of increasing focus, offering an opportunity for the birth and rapid growth of digital currencies and other DLT-based liquidity and payments management tools. Our client, a European venture capital firm, had observed these market signals and identified an opportunity to invest in a pioneering technology early-stage startup operating in the space. However, our client lacked the deep technical expertise around DLT and CBDC to confidently assess the company’s long-term viability.  

Our client needed advice from subject matter and industry experts on both the market and competitor landscape of the startup they were looking to invest in, the commercial viability of its business model, commercial differentiators, risk considerations and potential red flags. This advice would feed into the overarching deal incubation process to inform a decision on a >$7 million Series A investment.

The Approach

Over a two-week period, drawing on the knowledge of our global innovation network and in-house DLT and CBDC experts, we conducted a thorough market scan. Leveraging these insights, we provided our client with an understanding of the market landscape and the startup’s competitive position. Through a series of management interviews and content reviews, we assessed the target’s value proposition and product-market fit and conducted a detailed competitor analysis across its six product lines. We identified potential commercial risks and mitigants for the deal across operations, technology, intellectual property (IP), commercial return, regulation and legal, and competitor activity. In addition, we ascertained the startup’s differentiators and defined the critical success factors for our client to realise value from the deal. Finally, we consolidated a clear and digestible recommendation report for our client to enable effective decision making around the decision.  

The Impact

Given the niche subject matter and infancy of the CBDC / DLT markets at the time, our expert advice and ability to translate highly technical subject matter into a digestible and tangible description of the value proposition was crucial to enabling our client’s decision-making process. Beyond supporting the pre-deal activities, we have extended our ongoing support to both the VC firm and portfolio company in enabling their growth journey through making relevant introductions to potential buyers in our extensive wholesale banking network.