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  • Writer's pictureAvalia

How Data Can Reveal a Different Story When Assessing Key People in a Startup

When evaluating startups, the spotlight often falls on the team and their product. The processes, which are essential for scaling and growth, are still being refined. In a small team, it might seem straightforward to ask who the key developers are to identify the crucial players. But, does this approach always paint the full picture?


In this article, we delve into a case where we learned through data that a pivotal member behind the product development had recently left the company. Following this departure, the remaining team's contributions amounted to only 5% of the source code. This statistic was a red flag, suggesting a stagnation in innovation - a critical factor for any growing tech company.


The story behind the code


The story unfolds with us at Avalia Systems, tasked with conducting software due diligence for a large company planning the acquisition of a promising startup. Our team analyzed the startup’s code version control and project management tools covering the last 12 months. The initial findings were misleadingly optimistic, showing a seemingly balanced contribution from the startup’s development team.


However, a deeper dive into the code told a different story. Astonishingly, only 5% of the codebase had undergone changes in the past year. This statistic was a red flag, suggesting a stagnation in innovation - a critical factor for any growing tech company.


Graph highliting the percentage of changed and unchanged code

Valuation in Crisis


This revelation had severe implications for the startup's valuation. The departure of the key developer, coupled with the need to restructure the R&D team and offer competitive salaries, led to a one-third reduction in valuation.


The Strategic Advantage of Data Insight


This case study demonstrates the power of data in revealing the true state of software development within startups. It underscores the necessity of looking beyond surface-level assessments to mitigate risks and accurately value the innovative potential of emerging companies.


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