To truly understand a potential financial partner, the Chomps team went beyond the supplied references. They found a founder whose company didn't succeed under the PE firm's investment. His positive review of the partner's character, despite the negative outcome, provided the most powerful signal of trust.

During diligence, speak directly with the target's largest clients. You may uncover deal-breaking risks, such as a client who will leave post-acquisition because their internal rules prevent reliance on a single, monopolistic supplier, a fact you would otherwise miss.

In an information-poor credit market, H.I.G. gains its advantage by tapping its network of portfolio company CEOs and deal teams who have competed with or analyzed a target. This internal, proprietary insight provides a deeper level of diligence that independent firms cannot replicate, allowing for confident investment in troubled situations.

To secure allocations in competitive private rounds, public market investors like WhaleRock create extensive, proprietary research decks (e.g., a 90-page analysis). This demonstrates deep understanding and value beyond capital, earning them a spot over other investors.

Public market investors often have only 90 days to diligence an IPO using the S-1 filing. Crossover investors who engage with companies privately for years develop a deep, historical understanding of the business and management. This long-term context provides a significant informational advantage and allows for higher conviction.

With companies staying private longer, public market investors can't ignore private markets. Whale Rock's deep research on public company Adyen required them to intensely study its private competitor, Stripe. This cross-market analysis is now essential for understanding competitive dynamics and identifying future trends.

Deciding whether to back a competitor is fraught with conflict. When the speaker considered investing in Stripe, a Square executive called it a conflict, but CEO Jack Dorsey approved. This shows opinions on threats vary internally, justifying multiple checks before proceeding with a potentially conflicting investment.

Many PE firms use backward-looking commercial due diligence, which is superficial and fails to assess a target's true growth potential. A more effective approach is go-to-market focused due diligence that evaluates the scalability of the future revenue engine, not just past performance.

Founders Fund's preemptive investment in Nominal was driven by an 'inside view' from their other portfolio companies who were Nominal's customers. This direct feedback loop on the software's necessity gave them the high conviction to invest early and aggressively, bypassing traditional diligence.