Azella Perryman is the VP of Customer & Sales Operations at Flyhomes, the proptech startup streamlining the search, purchase, and move-in process for even the newest of homeowners. 

She also led teams at Lyft, DoorDash, and Square, and has recently started angel investing. We sat down with Azella to dive into her personal approaches to investment diligence. We cover: 

1. Why you need to go back to basics with your due diligence
2. Evaluating whether a startup can withstand competition
3. How to properly vet a founder and their founding team

“I like to start with basic but essential questions that might get overlooked. Is this problem actually a problem? Does this solution make sense to me?” 

Getting back to basics in due diligence

Azella has cultivated plenty of investment insights not only from her time with Angel Squad — but also through her career as an operator and exec at Flyhomes, Lyft, etc. 

She shares a few core benchmarks that she uses to analyze deals and founders. 

First off: It’s not all cut and dry just because the numbers tell a certain story. In fact, there are a few fundamental assumptions that you have to question in order to properly evaluate the long-term quality of an investment. 

For Azella, interrogating whether the business solves an actual problem or meets a real need is crucial. Most companies can meet this criterion. 

Yet, “some are just out here because they want to do something” — whatever that something is. 

That’s not the type of business that should attract your capital. 

Beyond this, investors should question the very reason for its existence. In other words: 

• What kind of societal or global value could this business present, if any? 
• Then, how might that value also translate into a return on capital? 

According to Azella, being able to answer those questions — without losing sight of more obvious performance metrics — is what distinguishes astute investors from amateur ones. 

Evaluating whether a team can withstand competition

“What else is out there?” Azella repeatedly asks herself this question during due diligence flows. 

Startups do not operate in a vacuum. In fact, their value is largely (if not entirely) dependent upon the other players in their respective markets. 

It comes down to the basic competitive nature of the capitalist ecosystem. If a business can identify and fill a niche in a way users love, it can dominate its respective space. This obviously means major profits. 

So, for Azella, looking at the industry’s growth profile is critical. Is the vertical crowded, is there space for healthy entry, or could this business even become the defining player? 

Looking for a defensible moat

If it turns out the startup’s market is crowded (generally a bad sign), she’ll evaluate whether the business can withstand the pressure. 

In her words: “If it’s crowded, I’ll look at your unique business model — whether it’s defensible and has a moat.” 

She affirms that this moat for a startup — the ability to occupy a space in the landscape that others cannot or will not enter — is what makes an investment attractive and primes it for success in the long haul. 

“What’s your unique business model that’ll prevent someone else from jumping in, copying you, and taking your space in the market?” 

How to thoroughly vet an early-stage founder

“What do you have that nobody else has?” This question is paramount for Azella and informs her entire investment process. 

Quite simply, she emphasizes that a founder should be a unique stand-out. 

Without those qualities, a founder will likely end up making decisions and running their company the same way anyone else would. And this leads to average results. 

When meeting with founders, Azella will start with questions like: 

• What kind of leadership team are you putting together? 
• What previous experience do you have with startups or building from zero? 

We know that, in the startup world, investors are taking a leap of faith to bet on one thing: one startup, one product, one basic idea. 

Optimizing for vision and energy

So, we leave no stone unturned during due diligence. 

This applies to founders (and their founding teams) as well, since they could very well be the backbone of the business for the rest of their life. 

Without that rock-solid foundation or the vision, drive, and energy to execute things that others deem unfeasible, your investment opportunity looks bleak at best. In short: 

Investment risk can’t be eliminated. But, with the proper tools and diligence, it can be mitigated. 

“If the idea, the team, the metrics, and the decent execution are there — those are my kind of criteria for a solid investment.”

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