I’ve talked to a lot of experts. Having spent time in different emerging markets, both as an investment banker helping companies raise public funding and as a strategy consultant helping multi-nationals grow profitably, I know all about the headaches of finding the right experts to answer technical questions and pose better questions of their own.
In mature markets, even very niche industries – say machines that perform XYZ tests, or bearings used in Maglev trains – have decent coverage by research firms because the market is big enough and industry knowledge is mature enough. In “frontier” markets like China, however, there are no historical data and no analysts focusing on these niche areas. So where do you start when your clients want to know just how big a market is for that testing machine or how fast and profitable a particular type of company can grow in that market?
I’ve spent huge portions of project budgets on expert interviews via recruiting firms – many times employing several firms concurrently because no single firm could revert with the right experts quickly enough.
My experience was always the same – our firm would pay a hefty annual fee to gain access to an expert network, and then pay hourly rates on top of this annual fee to interview experts with a wide range of experience and caliber. Sometimes, I would encounter a fee differential of more than 10x between these experts – for example between the ex-CEO of a global leading company and an R&D manager with less than 5 years of experience.
You’d think with this infrastructure of expert recruiting in place, professionals conducting due diligence would have an easy enough time finding the right people to answer all their technical questions. But more often than not, even with careful vetting using short questionnaires, I came across experts with lofty titles that would comment on mega-trends over a 50-year span but would have no clue as to the practical implications of a technical detail.
But when I did finally find the right experts, the results were amazing. And these spot-on experts often didn’t have big titles or fancy degrees, but were active, on-the-ground practitioners in one element of the industry value chain – e.g. the Quality Assurance manager or the line manager in a mid-sized plant in the middle of nowhere. They knew the day-to-day bottlenecks, quick fixes and long-term solutions, and best of all, they sometimes came up with creative but practical ways to size the market and project future growth. Another group of valuable experts without illustrious titles? Young scientists and professors, who were just a bit more tech savvy and active in cutting edge discussions. But how did they ever pop up on our recruiting firms’ radar? They didn’t.
This is why personal referrals may work much more efficiently. The few times my team got lucky with experts recruited in our usual channels, those experts in turn made personal recommendations for us to talk to their students, industry partners, or smart sales people. The outcomes of those referrals proved to be far more incisive regarding specific pockets of knowledge and targeted discussions.
And when we would find these truly valuable experts, people would scratch their heads, wondering how on earth my team was able to come up with these 360-degree views of a particular product or technology, including market size and growth potential of the obscure machine XYZ. The answer was: not through throwing bundles of cash at the widely-recognized luminaries in the field, but by finding the right referrals.
When it comes to hard-to-understand, complex technologies, expert referrals are the key – not the conventional route of seeking out big names and big titles. This insight has served as the cornerstone of our development of a unique crowd-sourced online diligence infrastructure at Propel(x). We are developing a system that will enable the investors on our platform to refer experts and obtain their insights regarding such crucial issues as technology risks and competitive landscapes for each of the deep technology startups raising funds on our platform. And it is this insight that in turn will enable them to perform the diligence required in order to make wise investments.