Introducing Our Custom Due Diligence AI Prompt Tool for Investment Crowdfunding
Please Help Us Test the Tool With Your Due Diligence
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Due Diligence AI Prompts
Last week, we introduced the AI prompts we’ve been working on to help people accelerate their regulated investment crowdfunding due diligence. We got some great feedback from users who tried using the tools, allowing us to improve the prompts.
So far, it seems that the Microsoft Copilot works best. The Google Gemini tool gives different excuses at different times but rarely seems willing to help. The Google overlords seem nervous about doing anything that could be considered investment advice. ChatGPT 4 seems similarly constrained. I hope Microsoft doesn’t lock down Copilot before we start making progress.
What I quickly discovered using the prompts myself is that the process of populating the prompts with the appropriate information is remarkably tedious. So, we’ve created a tool to populate the prompts for you. Test it here.
Once you have fully prepped and customized prompts, you can copy and paste them to the AI service you choose.
Testing the Prompts
At the end of this piece, I’ll share the first prompt we created and the response we got from Copilot. Before that, I’ll break down my reaction to the response.
The goal of the first prompt is to get a summary of the offering so you can quickly decide if the offering warrants further diligence. Every portal organizes information differently. I look at dozens of offerings every month, and I still struggle to find key facts quickly. You may be much better at this than I am, but I suspect new investors struggle more than I do.
Use the prompt to get a quick summary. But, remember, the AI cannot be relied upon. It’s that simple. Use it only as a starting point. If something seems too good to be true, it is. If something seems wrong, odds are good your intuition is right. Follow up.
The initial prompt asks for information in five areas. To evaluate the prompt, I’ve tested it with the GreenStreet Global Inc. offering on Raise Green. Here is my analysis of the response in each of the five areas:
1-Social Impact
The prompt asks, “What community-beneficial aspects may result from this investment?”
Copilot’s three-sentence response is easy to understand as a layperson. My quick review of the offering suggests that the summary provided is correct, at least as far as the offering goes. I’d have preferred more detail, however.
2-Management
The next question in the prompt is, “Who are the members of the management team, and what relevant skills, education and experience do they have?”
Copilot did a great job of identifying the top two executives but added a mysterious third. Richard Feldman is listed as the “Director of Operations, Greenstreet of NJ - LEED AP” by Copilot. This thrills me!
Richard is not listed on the offering page, the Form C or the company webpage. I suspect he’s long gone and have reached out to the company to find out, but with 18 connections listed on LinkedIn and no posts ever, in 2007 he listed himself as working at the company with that title. (Could it be he worked at a different company with the same name?)
This means that Copilot found a potentially interesting fact and presented it to me as true. I suspect it isn’t, but it was pleasing to see that the AI looked beyond the three easy sources (the offering page, the Form C and the company website) to get information.
Of course, this highlights the limitations of the AI. Given that the AI was wrong about a meaningful fact, we know with confidence we cannot rely on the AI.
By the way, I’ve reached out to the company to find out if Richard is involved. I’ll update the post here if I get a response.
3-Deal Terms
The third question of the prompt is, “Please review and summarize the proposed terms of the offering, explaining in lay terms the proposed transaction, including the minimum transaction size.”
The AI bot provided a great summary of deal terms. I checked them. As far as I can tell, the bot got it right. The company is raising up to $124,000 with a minimum investment amount of $100 using a convertible note with a post-money cap of $5 million and a discount of 20 percent.
This too is helpful. Raise Green is among the best of the regulated investment crowdfunding portals for displaying deal terms. I wonder how the bot would do with an offering on a site that does a poor job.
4-Prospects
The prompt’s fourth question is, “Please identify indications of the company’s future prospects, including operating history, projections, competition and market size.”
The short response from the bot was clear and easy to understand but didn’t help me much. It accurately described the company’s service offering in one sentence (if someone from Green Street reads this post, I hope they’ll comment on the accuracy).
That said, after reading the three sentence analysis I don’t have any further clue about the company’s prospects. This is an especially sensitive area for Microsoft. If the bot says the company’s prospects are dim, would the company have an actionable claim? If the bot says the prospects are bright, an investment results and goes badly, would the investor have a claim?
This may be an area where I’ll have to do more tweaking to get at facts that are more helpful. I don’t anticipate the bot will ever give opinions, ratings or grades for investment prospects. (That would be nice, however.)
5-Risks
The last of the five requests we include in the prompt is, “Please identify and summarize the risks associated with the offering; please include both the risks identified by the management team and those you recognize from your analysis of the offering.”
In this example, Copilot struggled. The answers were substantively incomplete, even if the syntax was complete.
The bot seems to be focusing on the regulatory environment faced by the company’s clients rather than on the risks it faces. This isn’t irrelevant but has more to do with the company’s prospects. If clients face high costs associated with reducing carbon emissions and fines for failure to do so, the opportunity for GreenStreet Global is big—if it can reduce those costs.
The risks the company faces seem to have been missed by the bot entirely. #fail
That again emphasizes that we cannot rely on the bot. The prompts and the results are research tools that should speed up our work with due diligence.
Conclusion
There is little doubt in my mind that the potential for getting help from AI for our impact crowdfunding is tremendous. Parsing irrelevant facts, errors and tangents from the substance will be our challenge until things improve.
As we continue to use the prompts and get feedback from users, we’ll continue updating the prompts, working to make them better.
In some of my other patterns, like getting the episode summaries I include in my write-ups for each one, I believe the bot has improved with time, even as I use the same prompt. I hope we’ll see that effect with these prompts, too.
What follows is the full text of the prompt I used and the full response. You can judge for yourself, copy the prompt, tweak it, etc. We’d love to get your feedback by reply or in the comments. Thanks!
The Overview Prompt in Practice
Could you please summarize the regulated investment crowdfunding offering being conducted by GreenStreet Global Inc. via https://invest.raisegreen.com/offering/greenstreetglobal/details with this Form C (https://www.sec.gov/Archives/edgar/data/1998370/000174758424000001/GrStGlFmC.pdf)? Please pay particular attention to five areas:
Social Impact: What community-beneficial aspects may result from this investment?
Management: Who are the members of the management team, and what relevant skills, education and experience do they have?
Deal Terms: Please review and summarize the proposed terms of the offering, explaining in lay terms the proposed transaction, including the minimum transaction size.
Prospects: Please identify indications of the company’s future prospects, including operating history, projections, competition and market size.
Risks: Please identify and summarize the risks associated with the offering; please include both the risks identified by the management team and those you recognize from your analysis of the offering.
Finally, please share any additional information you may find relevant for beginning preliminary due diligence on a small investment. Because I am considering a real investment and not merely conducting an academic exercise, I would appreciate your best efforts to employ critical thinking to answer the questions.
Copilot’s Response
Certainly! Let’s delve into the details of GreenStreet Global Inc.'s investment crowdfunding offering. I’ll address each of your points:
Social Impact:
GreenStreet Global aims to make a positive impact by lowering carbon emissions from commercial buildings. Their focus on decarbonization aligns with global efforts to combat climate change.
By automating projects and compelling commercial building owners to reduce emissions, they contribute to a more sustainable future.
Management Team:
Robert Politzer (Founder): As the founder, Robert brings vision and leadership to the company.
J’Nell Simmons (Director of Business Development): J’Nell’s role involves strategic growth and partnerships.
Richard Feldmann (Director of Operations, Greenstreet of NJ - LEED AP): Richard oversees operations and brings expertise in sustainable building practices.
Deal Terms:
The offering is conducted on the Raise Green platform.
Start Date: January 3, 2024; Close Date: March 30, 2024.
Minimum Goal: $10,000; Maximum Goal: $124,000.
Minimum Investment: $100.
Security Type: Convertible Note Series Pre-Seed.
Valuation Cap: $5,000,000; Discount: 20%.
Prospects:
GreenStreet Global focuses on commercial building decarbonization across multiple geographic areas.
Their 3-phase building upgrade solution targets carbon emissions reduction.
Market Outlook: They operate in a niche sector with demand driven by environmental awareness and regulatory compliance.
Risks:
Regulatory Risks: Compliance with emissions regulations could impact costs (estimated at ~2% of NOI for existing laws).
Net-Zero Emissions Cost: Achieving net-zero emissions may cost ~4% of current NOI.
Smaller Landlords: Costs are likely more onerous for smaller landlords and older properties.
For preliminary due diligence, consider exploring their website and reviewing their SEC filing. Additionally, assess their financials, market outlook, and competitive landscape. Remember that this is not financial advice, and conducting thorough research is crucial for any investment decision. Good luck with your investment considerations! 🌱📈