Use case - M - D'Ornano + Co

Objective

New Investment

Investment stage

Venture Capital

New Business model

SaaS [Horizontal Applications]

Case Study

D’ORNANO + CO. PERFORMED HYBRID GROWTH DILIGENCE FOR A LEADING US VENTURE CAPITAL FIRM CONSIDERING AN EARLY-STAGE INVESTMENT IN A EUROPEAN MENTAL HEALTH SAAS PLATFORM

The investor wanted to complete an Early-stage investment round in a European Mental Health SaaS platform seizing the momentum of the mental health space to create an innovative service that sits between employees and HR departments. The company had identified an emerging market as enterprises sought to find creative ways to provide mental health benefits to employees to improve their well-being and increase workplace satisfaction. The company attracted intense competition for its Series A round.

Challenge

Despite still being relatively young, the startup needed to scale rapidly to meet demand while also expanding its platform. Via that platform, employees can choose different modes of therapy, from one-on-one sessions to groups to general self-help advice. The company’s core business focused on selling to HR managers, but to demonstrate value, it also needed to ensure that a large percentage of employees were engaging with the platform. This made it effectively a B2B2C company, that must navigate healthcare regulations. Traditional due diligence is backward-looking and, for High-growth and Disruptive companies, does not provide comfort on a company’s ability to deliver sustainable growth and create value. Also, because traditional due diligence takes a broader industry approach rather than a more precise business model approach, it can only generate a surface-level view of a company’s financial health with a limited picture of an asset’s strengths and weaknesses to consider in the investment process.

Solution

The investor hired D’Ornano + Co. to apply its Hybrid Growth Diligence for Early-stage VC product which grasps the specificities of innovative business models, identifies in a short timeframe any deal-breaking items, and secures key aggregates, while creating a trustworthy relationship with the entrepreneur to assist him/her on follow-on needs. Going beyond classic due diligence, the firm’s HGD methodology layers Financial, Legal and ESG diligence on top of preliminary business model analysis and incorporates operational data mirroring the company’s economics in the assessment performed. The result is an in-depth analysis performed in record time to satisfy the expectations of an investor assessing a high-growth + disruptive asset in the context of an early-stage round.

Mission outcome & key client impact

By using the Hybrid Growth Diligence approach, we helped our client in better understanding the numbers at stake and validating the resilience of the target’s business model by testing:

The company’s product market fit, by analyzing sales traction since inception;
The platform’s MRR level, basis of valuation, requiring an analytical perspective and clear understanding of the contractual terms governing customer contracts and of the sophisticated policy around usage;
The existence of a clear scalability of its model through recalculation of gross margin levels, to ensure the company’s ability to scale.

In validating the target’s product market fit and the absence of any deal-breaking items, we helped our client confirm its investment thesis.

New Business Model

+ Vertical

SaaS [Applications] companies allow end users to access software applications over the internet through the payment of subscription fees. D’Ornano + Co. has historically conducted multiple SaaS [Applications] assignments for global investors.