How Due Diligence is Evolving in Venture Capital

A Microsoft-backed artificial-intelligence startup was just exposed for propping up its “cutting-edge” chatbot with more than 700 human workers in India—while pitching investors on supposedly autonomous tech. (https://lnkd.in/gy7qruFM) This governance breakdown is exactly the phenomenon we analyze in “The Due Diligence Dilemma,” a forthcoming Illinois Law Review article I co-authored with Professor Yifat Aran. Our research shows how venture capitalists increasingly lean on proxy signals—famous co-investors, viral hype, founder charisma—rather than probing the fundamentals. We map the structural incentives that let exaggerated traction metrics slide by and propose reforms to restore rigorous, transparent evaluation. Special thanks to everyone who sharpened our thinking—including those who joined my session at the ComplianceNet Conference at Fordham University School of Law earlier this month, and those who engaged with Yifat’s presentation at Vanderbilt University Law School the month before, among others. Which reforms would most effectively improve genuine diligence in early-stage investing? We would love to hear your thoughts! #DueDiligence #VentureCapital #CorporateGovernance #StartupEthics #VCFunding #StartupFraud #GovernanceFailures #Compliance #RiskManagement Barbara-Ann Boehler J.S. (Josephine Sandler) Nelson For the full paper see: https://lnkd.in/ghCnfewH

AI is transforming Venture Capital — and this is not a future trend, it’s already shaping how we operate. At Kiara Capital, we’ve been closely observing — and adopting — how AI is reshaping key parts of the investment process. Due diligence, once heavily reliant on manual analysis and networks, is now being accelerated by AI-powered tools that process vast amounts of data on markets, technologies, founders, and signals that were previously invisible at scale. But here’s something we strongly believe: AI is incredibly powerful for spotting patterns. But it’s not designed to detect outliers — and that’s exactly where breakthrough opportunities live. In venture capital, data and algorithms can optimize parts of the journey. But the ability to identify founders who defy the data — the bold ones building what doesn’t exist yet — still depends on human judgment, networks, and intuition. This is why, at Kiara, we see the future of VC as hybrid: combining the precision of AI with the nuance of human relationships, pattern recognition with contrarian thinking. The transformation is happening now. Those who ignore it — on either side — risk being left behind. Highly recommend this article from Oxford Saïd Business School exploring how AI is impacting venture building and VC. Worth the read: 👉 https://lnkd.in/evfW2Ee9 #KiaraCapital #VentureCapital #AI #Investing #DueDiligence #Innovation #Startups #FutureOfVC 

📊 Traditional due diligence in venture capital is broken. It’s time for a rethink. The Due Diligence 2.0 (https://lnkd.in/gzZ-q-6w) movement is challenging the old ways of evaluating fund managers, founders, and investment opportunities. And for good reason. For decades, institutional LPs have relied on check-the-box diligence criteria that, in many cases, excluded highly qualified, high-potential managers. Now, the playbook is evolving. Key shifts in Due Diligence 2.0: ✅ Rethinking Track Records – Instead of only looking at prior fund performance, investors are assessing decision-making frameworks, network strength, and sourcing ability. ✅ Reevaluating Minimum AUM Requirements – Emerging managers with smaller AUM but outsized performance potential are getting a second look. ✅ Embracing Non-Traditional Team Structures – Solo GPs, emerging fund managers, and diverse teams are now seen as advantages, not risks. ✅ Beyond the Metrics: Storytelling Matters – LPs aren’t just betting on numbers; they’re betting on a manager’s ability to articulate their edge, access, and strategic differentiation. For allocators, the takeaway is clear: 🔹 Old diligence frameworks don’t work for a changing market. 🔹 The best fund managers aren’t just the ones with long resumes—they’re the ones with clear theses and conviction. 🔹 Adaptability in due diligence is key to finding alpha. Allocators, how do you see due diligence evolving for the next generation of fund managers?