Trust, But Verify: Due Diligence in the Age of the Endless Pitch
By Sally Mccoy ’26, Associate
It’s no secret that social media platforms have a way of showing their users exactly what they want to see. For example, a typical day on my For You Page consists of day-in-the-life videos from other young women in their 20's, whereas for a first-time mother, her Reels might be an endless scroll of innovative baby products and helpful videos on navigating the highs and lows of parenthood. Conversely, a teenage boy could be quick to scroll past such videos with a high probability of never seeing anything similar again. This is because Meta and TikTok alike, have tools in place to deliver highly personalized content to their users.
In an interesting parallel, the software used to filter information in the media reflects a similar phenomenon that is the way founders cater their pitches to investors. During my first semester in the Fund, I quickly grasped the importance of critical internal analysis when evaluating a founder’s pitch. With the first company, I was elated by the idea of the Fund’s investment undoubtedly going far; however, after a brief discussion with my fellow associates, I quickly realized conducting extensive research was going to be crucial in determining the validity of the founder’s claims.
Whether it’s overstating financials or understating competition, founders are careful in the information they choose to reveal to investors, especially in their initial pitch. Furthermore, founders can simply withhold certain information until a later date, making their startup appear as a more attractive investment up front. The crossover between the media and startup presentations re-appears when we take an even deeper dive into how Instagram’s algorithms operate. It’s important to note that the more famously known “algorithm” has recently been replaced by AI, but the concept and overall operations remain the same. The AI uses a series of ranking factors to determine what each user sees, along with the order in which they see them. It shows users the content that ranks highest, first.
On one hand, this personalized user experience seems highly beneficial. Less time is wasted looking for specific content, and individual beliefs are thrown into a continuous stream of validation. On the other hand, the issue arises in the latter point in which social media algorithms and AI play a large role in amplifying the spread of fake news, a prevalent topic now more than ever. A report by Queen’s University discussed the various ways fake news is spread. One channel of misinformation includes information environments where users are only exposed to information from like-minded sources, also known as echo chambers. Echo chambers increase circulation of misinformation in the media, making it hard for users to differentiate between fake news and credible journalism.
Following this unfortunate pattern, the desire to prove the truthfulness behind points we already agree with, dissipates. Comparably, as much as we want the startup to be revolutionary and see high returns, it’s crucial to do our due diligence and decrease the chances of a faulty investment. In the Fund, the internal discussion we hold at the end of each pitch is an essential way we combat this matter. Following each pitch, the Fund uses the remaining class time as an opportunity to share further insights and opinions on the company. Everyone is encouraged to voice any concerns and questions they may have, giving the due diligence team even more areas to consider before conducting their research. This 15-minute conversation enables the team to conduct more focused and insightful due diligence. On your own accord, performing additional research into the new headline you read from @DefinitivelyTrueNews before relaying it to three of your group chats is just as imperative.
In conclusion, we are constantly being influenced by clever, yet highly effective, marketing tactics. Online, we’re influenced to buy shiny supplements, listen to new podcasts, and even to invest in various stocks and cryptocurrencies. During a startup pitch, we’re enticed by compelling narratives, tailored industry data, and overemphasis on competitive advantages. Whether it’s the apps wanting your engagement with the content, or a founder craving a “match” on funding, we all need to be doing our due diligence to aid in the decipherment between misinformation and evidence-backed facts.
