Use case - W - 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 PRIVATE EQUITY FUND, IN ITS EARLY-STAGE INVESTMENT IN A DIGITIZATION OF TALENT AND PROJECT PORTFOLIO START-UP

The investor wanted to make an Early-stage investment in a developer of staffing and talent management software. The company had built a platform that serves firms of all sizes in such sectors as professional services, IT, consulting, auditing and engineering. Its AI-driven SaaS platform helps companies efficiently identify skills needed for certain projects with the right talent, and then manage those relationships. The company had initially established itself as a strong player in its home market, but now wanted to expand its SaaS product and go deeper into new territories. By building around SaaS and targeting the workplace market, the startup had aligned with two important megatrends.

Challenge

The company had strong traction and potential to scale, but its revenues were still heavily dependent on its home market. Because it worked with a wide variety of businesses, each of those could possibly be impacted in very different way by macroeconomic changes in terms of hiring. In addition, navigating new territories, including legal and regulatory issues, can be complex. 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 retained 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. The product also delivers in-depth analysis to satisfy the expectations of a PE client assessing a high-growth asset that doesn’t have the maturity of a company traditionally looked by a Private Equity player. 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 validated the resilience of the target’s business model by testing:

The company’s product market fit in analyzing historical month-on-month revenue growth;
Its ability to convert Enterprise customers in addition to SMBs, which confirms its ability to scale further and opens the door to upsell opportunities;
The existence of clear scalability and profitability potentials by validating the gross margin profile, stripped of consulting costs.

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

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.

The HR Tech vertical includes all companies developing software or platforms designed to improve human resources management as well as hiring processes*. D’Ornano + Co. has historically conducted multiple HR Tech assignments across multiple business models.