Entrepreneurs and Investors Alike Embrace Diligence-as-a-Service
TABS Team — www.tabsscore.com
Any entrepreneur who has ever raised capital knows just how frustrating, intrusive, and nerve-wracking the due diligence process can be. However, what most entrepreneurs don’t always know is that the process can be just as difficult for their potential investors.
It’s tempting to look at complex issues from a single perspective and force them into a simple and often self-serving narrative. The truth, however, is not as clear cut. Today’s investment due diligence process is broken for everyone involved.
Fortunately, all of this is about to change — meet TABS Score, the startup selling Diligence-as-a-Service.
How We Got Here
For most entrepreneurs, the startups they create are a reflection of themselves. For better or worse, much of their identity is tied up in the perception of their businesses, and as a result, there is a tendency to try and present things in the best light possible. This leads to what I like to refer to as “truthiness,” and it’s a real problem for the investment community.
Some of this behavior is indirectly and unintentionally encouraged by the very investors that it hurts.
There’s no standard when it comes to a startup’s due diligence process. Too often, investors rely on experience and gut instinct to evaluate opportunities, rather than hard data. Why? Well, as most investors will tell you, it’s nearly impossible to apply a quantitative approach to fundamentally qualitative measures. Until now, of course.
Enter TABS —
TABS Score was developed by the serial entrepreneur and investment team at Frontline Strategy Funds in early 2019. The inspiration for the TABS Suite came from personal experience in building and scaling ventures. As an EIR for the Frontline Funds team, UB helped address massive flaws in the Pre-Seed to Series A diligence processes, including those that he conducted himself as an angel investor to tens and tens of startups.
Frontline set to work, collaborating with well-known investors around the globe, and translating the experience they had gained over the years to identify the real sticking points of the existing diligence process. The focus initially was on the US startup and venture capital ecosystem, and UB’s focus on product, strategy, and growth in the US & Europe for TABS allowed for the massive user adoption that TABS has seen over the past 12 months.
Two problems needed to be solved. First, investors needed a structured and consistent approach to gathering the necessary information to make an informed decision. Second, they needed a method of validating, visualizing, and weighting that information. Those investors, or really anyone working with startups that need to understand the venture from both a macro and micro perspective, are often faced with the decision to either evaluate less companies, or perform a less thorough analysis / diligence. Because of the tremendous risks associated with early-stage investing, be it time or capital (or both), the choice often defaults to evaluating a smaller pool of companies, allowing potential unicorn or micro-unicorn companies to fall through the cracks.
The solution to these two obstacles? It’s a system that combines human-powered AI and machine learning to collect information and keep entrepreneurs honest about their venture. It does this by asking questions multiple ways, observing user behavior, and running a proprietary algorithm to assign a total score to the overall opportunity. The next-gen tech aspects that run in the background are the ‘icing on top’ for TABS Suite’s various assessment types, including the “truthiness” traps that ensure the entrepreneurs are providing information that is both accurate and verifiable.
The resulting TABS Score not only provides investors with an accurate picture of the business; it also provides the entrepreneurs with valuable feedback to help them improve over time which excites strategic investors like General Partner Andrea Vossler from Varia Ventures.
“As an experienced and active investor, the TABS solution is a cutting-edge new tool that makes ‘diligencing’ investment opportunities efficient and affordable”
A Real Game Changer
Although the cloud-based, SaaS spinoff Diligence-as-a-Service concept is in its infancy within the ecosystem, TABS has quickly pushed ahead to the forefront of the movement and rapidly gained significant traction amongst a wide range of investors, from angel investors big and small, to traditional VCs such as Varia Ventures & Spark Capital, to well-known university accelerators such as Skysong (Arizona State) and Praxis (Cornell University) already on board exploring how they can scale with the tool.
The ability to customize assessments through the drag-and-drop builder is an additional game changer for TABS’ beta users, on top of the comfort in being able to organize diligence utilizing next-gen tech. According to long-time angel investor David Karabinos, TABS Score has fundamentally changed the way his firm approaches diligence.
“I advise my clients in raising Seed, A and B round capital. I spend considerable time upfront preparing them to pitch investors. In doing so, I assess them from a diligence perspective as any sophisticated investor would. The TABS Suite Digital-As-A-Service platform is long overdue and extremely valuable to me and my clients in the preparation phase as well as the diligence phase with investors. It essentially aggregates the diligence process and data as a 3rd party which provides credibility and consistent quality. The data sources and best practices it utilizes from the venture capital community ensures the entrepreneur will have a higher probability of being successful with the raise. I am thrilled to have discovered this platform and will be using it with all of my clients.”
The sentiment is shared by entrepreneurs as well. Phillip Thomas, the founder of interactive automotive show concept SLUSH Events, went through the TABS process while raising capital.
“This is my first time raising capital,” Thomas said, noting that “The entire process gave me a lot of anxiety. The background and context that TABS provided helped me to focus my efforts in the right areas to make my company more attractive to future investors.”
And traditional cash-for-equity investors aren’t the only ones who see ways to fit the TABS Suite into their existing processes. As a strategic angel investor, Jason Kraus from Prepare4VC actively works with tons of founders across a variety of industries to quite literally prepare them to take on venture financing. He, and many others in the startup consulting space, are grateful to have a tool that can perform a diagnostic to see where to focus their efforts when working with a young company and their team(s).
“TABS score has been incredibly valuable for the companies we work with to not only figure out what valuations they should be seeking in discussions with investors, but also what areas they can focus on within their business to boost their value in the next round. It is hard to grow in every area at the same time and this tool can help founders stay focused on short term strategy to enable their long term goals.”
TABS Score is poised to act as the great equalizer, enabling investors and entrepreneurs alike to eliminate their hidden biases and evaluate opportunities with more granularity and transparency than ever before. However, the real potential is the TABS Score’s ability to change the future of the investor/entrepreneur diligence dynamic, which traditionally has been a one-way road with little insight for the founders.
To learn more about TABS, please visit us at www.tabsscore.com or email us at firstname.lastname@example.org to chat with our team!