Digital Due Diligence: The Secret Weapon for Investors During Economic Downturns
Published: January 25, 2023
Author: Joe Kerschbaum
*A previous version of this blog originally appeared on our website. It has been altered and updated by 3Q/DEPT.*
Venture capitalists and private equity firms make huge decisions when they invest, and must assess all risks and opportunities of potential portfolio companies from every possible angle. Diagnosing industry landscapes, competitive threats, and unique selling propositions make the difference between a successful investment or one that costs your firm dearly. This is especially true during times of economic turmoil, when mistakes can be magnified even more than usual.
Investors often have a blind spot when it comes to a company’s digital marketing efforts. That’s a serious oversight, because not only can marketing reveal a treasure trove of data and insights that keep investors from taking unnecessary risk, but it also uncovers latent growth opportunities for a tremendous payoff down the road.
What kind of insights? Consider the most frequent questions we’ve answered for private equity and VC investors:
- How much opportunity is there if the target company tried to scale digital media spend?
- What would happen if Amazon started competing in our target company’s vertical?
- Is the website of the target company optimized for the action we want the user to take?
- Will Google’s innovative product strategy steal traffic from the target company?
- Was the site recently hit with a penalty, and what was the opportunity cost of that penalty?
- Is the target company currently using the right media mix to achieve its acquisition goals?
- Is the company going to be able to keep up with Google’s regular algorithm changes?
- Are there major threats in the space that would artificially inflate costs as we look to scale?
- What is the monetary value of the organic traffic that the site is garnering today?
- Does this company have measurement and MarTech infrastructure to succeed in a cookie-less/privacy-first world?
- Is this company extracting the maximum value from their zero- and first-party data?
These questions target both short- and long-term implications for a company’s ability to grow and scale. 3Q/DEPT’s digital due diligence capability can reveal more about a company’s potential for growth (and risk), especially hidden in paid search and paid social accounts.
If you’re an investor, or a company looking to attract investors, consider the insights to be gained from the digital landscape. Learn more about digital due diligence services at 3Q/DEPT.