AI Voice Agents Cut M&A Research Costs: DiligenceSquared
▼ Summary
– Traditional M&A due diligence is costly and time-consuming, often involving expensive external advisors like management consultants whose fees are not recouped if a deal fails.
– DiligenceSquared is a startup that uses AI voice agents to conduct customer interviews, aiming to provide top-tier commercial research for private equity at a fraction of the traditional cost.
– The startup’s founders have deep private equity and consulting expertise, which has helped them secure early projects with major PE firms and a $5 million seed funding round.
– The service significantly reduces cost, offering analysis for around $50,000 compared to the $500,000 to $1 million charged by firms like McKinsey, making such research accessible earlier in the deal process.
– While using a similar AI-interview model to consumer research startups, DiligenceSquared differentiates its due-diligence outputs and faces competition from other firms like Bridgetown Research.
Navigating the complex world of mergers and acquisitions demands significant resources, with private equity firms often allocating millions to external advisors for essential commercial research. This due diligence phase is notoriously costly, especially when deals collapse and those advisory fees are not recoverable. Traditionally, firms wait until they have high conviction before engaging top-tier consultants from firms like McKinsey or Bain, a delay that can impact decision-making. A new startup, DiligenceSquared, is challenging this model by leveraging artificial intelligence to deliver high-quality research at a dramatically reduced price.
Founded by Frederik Hansen and Søren Biltoft, the company brings substantial private equity expertise to the table. Hansen previously served as a principal at Blackstone, where he commissioned extensive diligence reports for major buyouts. Biltoft spent seven years leading similar efforts within BCG’s private equity practice. Their deep industry knowledge has already attracted business from several of the world’s largest PE firms and mid-market funds since the company’s launch last October.
The startup’s core innovation involves using AI voice agents to conduct interviews with customers of the companies under consideration for acquisition. This approach automates a labor-intensive and expensive part of the research process. While similar AI-interview technology is used in consumer research by companies like Keplar and Listen Labs, the founders emphasize that their due-diligence process and final deliverables are tailored specifically for the high-stakes private equity landscape.
A traditional consultancy report, involving interviews with dozens of corporate customers and C-suite executives combined with proprietary market data, can cost between $500,000 and $1 million. By utilizing AI for the foundational work, DiligenceSquared claims it can provide comparable analysis for approximately $50,000. To ensure rigor and accuracy, senior human consultants remain involved in the process, verifying the AI-generated insights and the commercial relevance of the final output.
This substantial cost reduction is changing how firms approach early-stage research. “We are taking these great insights that were previously reserved for the very big decisions, and now we make them more accessible,” Hansen explained. The lower price point encourages private equity groups to engage DiligenceSquared much earlier in their evaluation process, even before they have solidified their interest in a potential deal.
The company’s early traction convinced investor Damir Becirovic, a former partner at Index Ventures, to lead a $5 million seed funding round through his new firm, Relentless. DiligenceSquared is not alone in seeking to modernize this market. A primary competitor, Bridgetown Research, recently secured a $19 million Series A round co-led by Accel and Lightspeed. The founding team also includes former Google engineer Harshil Rastogi, rounding out its blend of financial and technical expertise.
(Source: TechCrunch)
