Try These AI Prompts to Accelerate Your Investment Due Diligence
Better Due Diligence Correlates Closely with Better Returns but Traditional Approaches Take Time
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Lately, I’ve been working to come up to speed on the use of Generative AI. It is so much fun! Last week, I asked ChatGPT how to fix my car, and among other options, it suggested a free and simple hack to defeat the problem rather than fix it. It took ten minutes and saved me hundreds of dollars.
I’ve also learned to create my own GPTs! Who’d have guessed I could do something like that?! It reminded me a bit of learning to code in Basic back in the early 80s.
Then, I created a rudimentary football game, where a bunch of dots chased my dot around the screen. This week, I created a GPT that allows you to learn more about The Super Crowd, Inc., a public benefit corporation, including upcoming events and speaker profiles. Click here to try it.
Here’s the real value I’m working to create. In recent months, I’ve come to appreciate a big challenge with crowdfund investing. Good due diligence research on investments leads to much better returns. Put another way, poor diligence leads to poor returns.
But good diligence takes time. How much time can you possibly spend on a $100 investment? We need tools to accelerate better investment decisions. Group work helps, allowing dozens of people to share the load. We created the Impact Cherub Club to deploy that tool. Now, I’m working to add AI.
To begin, I’ve created six questions or “prompts” in AI parlance to get started. I designed to be copied and pasted one at a time into a generative AI tool paired with a search engine like Microsoft’s Copilot or Google’s Gemini. The goal is to get AI tools to help accelerate diligence.
The first prompt is an overview-type prompt intended to quickly gather lots of basic data points to allow you to decide whether or not to continue your research. The subsequent prompts help you dig deeper.
Before we jump in, I want to point out that AI tools get lots of things wrong! They sometimes hallucinate; that is, they make stuff up and share it as fact. Never rely exclusively on AI-aided research for investment decisions. It is safer to use AI to decide not to invest than to choose to do so. Few investors regret not investing in risky offerings, but many regret making them. Proceed with caution. We can’t be responsible for any losses you experience.
Below, I’ll share the six prompts I created as I used them to research Equal Exchange, a social enterprise raising capital on Crowfund Main Street. Going forward, I plan to tweak, update and adjust them based on my experience and feedback from others who try them. Find the latest version here.
Overall, I thought the AI bot did a great job, but I spotted errors and limitations. Do not invest based solely or primarily on the exchange below! It struggled to find relevant data apart from the offering page, even where that would have been helpful. It sometimes failed to find basic information included in Form C and on the offering page. One significant problem is that the AI bot couldn’t read the financial statement PDFs that were created from scans.
If you try the prompts, I invite you to provide feedback in the comments. Let’s work together to improve them, enabling us and others to accelerate diligence and improve our financial returns and social impact.
Continue reading to see the prompts and the answers generated by Microsoft’s Copilot.
Overview Prompt:
Could you please summarize the regulated investment crowdfunding offering being conducted by Equal Exchange via https://crowdfundmainstreet.com/campaigns/x5el1q2g#form_c with this Form C https://www.sec.gov/Archives/edgar/data/797046/000079704624000002/0000797046-24-000002-index.htm? 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 answer the questions.
Copilot Response:
Certainly! Let’s delve into the details of Equal Exchange’s regulated investment crowdfunding offering. I’ll address each of your points:
Social Impact:
Equal Exchange is committed to building alternative trade networks that empower both farmers and consumers. Their mission includes:
Trading with small farmer co-ops that operate democratically and invest in their communities.
Supporting innovative programs related to climate resilience, sustainable agriculture, gender equity, and youth empowerment.
Creating a democratic food system that involves all stakeholders in the supply chain: farmers, workers, and Citizen-Consumers (like you!).
By investing in Equal Exchange, you contribute to a more equitable, democratic, and sustainable world.
Management:
While the specific management team members are not explicitly mentioned in the provided documents, Equal Exchange operates as a worker cooperative.
Their bylaws include a “Never Sell Out” clause, preventing the company from being sold for profit.
The cooperative strives for a modest 2-5% profit, emphasizing its commitment to its mission.
Deal Terms:
Investment Type: Promissory Note
Interest Rate: 3%
Maturity Date: December 31, 2027
Minimum Investment: $500
The offering is conducted through crowdfunding, allowing more people to participate in their alternative capital model.
Prospects:
Operating History: Equal Exchange is one of the biggest worker-owned co-ops in the country and a significant alternative trade organization globally.
Competition: While not explicitly detailed, their unique cooperative model sets them apart.
Market Size: As a player in the food industry, they operate within a substantial market.
Risks:
Management-Identified Risks:
These are not explicitly listed in the provided documents.
Additional Risks:
Market Volatility: Food markets can be unpredictable.
Financial Performance: Any business faces financial risks.
Regulatory Changes: Changes in regulations could impact operations.
Cooperative Model: The cooperative structure may have unique challenges.
Liquidity: Promissory notes may lack liquidity compared to other investments.
Additional Information for Due Diligence:
Research: Investigate Equal Exchange’s financials, track record, and industry trends.
Legal Review: Consult a legal professional to understand the investment terms.
Risk Tolerance: Assess your risk tolerance and investment horizon.
Remember, this is not financial advice, but I hope it helps inform your decision. Good luck with your investment! 🌱🤝🌎
Impact Prompt:
Thank you for your overview of the offering for Equal Exchange via https://crowdfundmainstreet.com/campaigns/x5el1q2g#form_c with this Form C https://www.sec.gov/Archives/edgar/data/797046/000079704624000002/0000797046-24-000002-index.htm. I’ve decided to continue my due diligence before I make an investment in the company.
As an impact-first investor, could you please help me further assess the social impact of the company, its products or its services? For this analysis, please look beyond the offering page and Form C filed with the SEC. Here are some specific areas that are important to me:
Does the founding team, owners or managers include representation from diverse backgrounds? Please explain what you learn. For purposes of this analysis, any member of a founding team who is not a white man should be considered diverse.
Does the company conduct activities that could reduce carbon emissions? Please explain.
Does the company address poverty or social justice issues with its operations? Please explain.
Does the company improve global public health? Please explain.
Is the company located in an underdeveloped community or one that is experiencing high unemployment and would benefit from having a business growing or expanding operations? Please explain.
Where possible, please provide links to help me verify the information you find. Because I am considering a real investment and not merely conducting an academic exercise, I would appreciate your best efforts to answer the questions.
Copilot Response:
Certainly! Let’s delve into the social impact aspects of Equal Exchange beyond the formal offering documents. I’ll address each of your points:
Diverse Representation:
Equal Exchange operates as a worker cooperative, which inherently promotes democratic decision-making and inclusivity.
While specific details about the founding team’s diversity are not explicitly provided in the documents, the cooperative model suggests a commitment to shared leadership and diverse perspectives.
Carbon Emissions Reduction:
Equal Exchange emphasizes sustainable practices and environmental responsibility.
They work directly with small farmer cooperatives, promoting organic farming methods that reduce reliance on synthetic fertilizers and pesticides.
By supporting small-scale farmers, they contribute to preserving biodiversity and healthier ecosystems.
Addressing Poverty and Social Justice:
Equal Exchange’s mission centers around empowering small farmers and promoting fair trade.
Their cooperative model ensures that farmers receive fair prices for their products, enabling them to sustain their livelihoods and invest in their communities.
Through fair trade premiums, farming communities can fund education, health programs, and social services12.
By advocating for fair wages and ethical supply chains, Equal Exchange contributes to broader social justice efforts.
Global Public Health Impact:
While the documents do not explicitly mention global public health initiatives, Equal Exchange’s commitment to fair trade and sustainable practices indirectly supports health.
By promoting organic agriculture, they contribute to healthier food systems and reduce exposure to harmful chemicals.
Additionally, their focus on community well-being aligns with broader public health goals.
Community Development:
Equal Exchange collaborates with grassroots Latin American farming cooperatives, often located in underdeveloped regions.
Their partnerships enable farmers to stay on their land, build sustainable livelihoods, and support future generations.
While specific community profiles are not provided, their work benefits communities facing economic challenges and limited opportunities.
For further verification, you can explore Equal Exchange’s official website1. Remember that due diligence involves researching beyond official documents, engaging with stakeholders, and seeking independent assessments. Best wishes on your investment journey! 🌱🤝
Management Prompt:
Thank you for your help in conducting due diligence on the offering for Equal Exchange via https://crowdfundmainstreet.com/campaigns/x5el1q2g#form_c with this Form C https://www.sec.gov/Archives/edgar/data/797046/000079704624000002/0000797046-24-000002-index.htm. I’ve decided to continue my due diligence before I make an investment in the company.
Could you please help me learn more about the management of the company? For this analysis, please look beyond the offering page and Form C filed with the SEC.
The CEO is Rink Dickinson.
For the moment, please focus on the background of the management team, especially the CEO, rather than on the business. I’ll follow up with additional requests for information about the company if the management team appears capable.
Please respond to the following specifics with a report using headings and sub-topics:
Business Profile: Please provide a business profile of the CEO and the rest of the management team.
Legal History: Please provide a litigation and legal history of the CEO and the rest of the management team; provide all available details regarding civil lawsuits.
Reputation: Please provide a reputation analysis on the CEO and the rest of the management team, including references to reviews of the team members’ professional capability.
Past Performance and Partnerships: Please provide a past performance and partnership business relationships analysis on the CEO and the rest of the management team.
Regulatory Compliance: Please provide a regulatory compliance analysis on the CEO and the rest of the management team.
Risk Assessment: Please provide an assessment of the risks of doing business with the CEO and the rest of the management team.
Where possible, please provide links to help me verify the information you find. Because I am considering a real investment and not merely conducting an academic exercise, I would appreciate your best efforts to answer the questions.
Copilot Response:
Certainly! Let’s delve into the background of the management team at Equal Exchange, with a focus on CEO Rink Dickinson and other key members. I’ll provide a comprehensive report covering the requested areas:
Business Profile: Rink Dickinson (CEO) and Management Team
Rink Dickinson:
Co-founder and President of Equal Exchange.
Involved in the company since its inception in 1986.
Visionary leader committed to fair trade, cooperative models, and social justice.
Instrumental in shaping Equal Exchange’s mission and cooperative structure1.
Background: Rink, along with co-founders Jonathan Rosenthal and Michael Rozyne, stood on a metaphorical cliff in 1986, envisioning a fairer food system that empowers farmers and consumers. They took significant risks, leaving their jobs and investing their own money to create Equal Exchange. Rink’s dedication to honesty, respect, and mutual benefit has been integral to the company’s success1.
Reputation: Highly regarded within the fair trade movement and known for his commitment to social change and cooperative principles.
Other Management Team Members:
While specific details about other management team members are not explicitly provided in the documents, Equal Exchange operates as a worker cooperative. Therefore, decisions are likely made collectively, emphasizing shared leadership and democratic processes.
Legal History
Litigation and Legal History:
The documents do not provide specific information about legal disputes involving Rink Dickinson or other management team members.
It’s advisable to conduct further research beyond the provided documents to verify any legal history.
Reputation
Reputation Analysis:
Equal Exchange is widely respected in the fair trade and cooperative communities.
Reviews and testimonials from customers, partners, and industry experts highlight the company’s commitment to social impact, transparency, and ethical practices.
References:
Reflections from Rink on the “Fair Trade Experiment” (Interview with Rink Dickinson)
Past Performance and Partnerships
Past Performance and Partnerships:
Equal Exchange has a long history of working with grassroots Latin American farming cooperatives.
Their partnerships enable farmers to sustain their livelihoods, invest in their communities, and build a better future for generations.
The company’s products have expanded from selling beans to religious communities to being available in grocery stores and retail outlets.
References:
Regulatory Compliance
Regulatory Compliance Analysis:
The documents do not explicitly detail regulatory compliance by the management team.
It’s essential to verify compliance with relevant regulations through additional research and official sources.
Risk Assessment
Assessment of Risks:
While the documents do not outline specific risks associated with the management team, consider general business risks such as market volatility, financial performance, and regulatory changes.
Evaluate the cooperative model’s unique challenges and the impact of their fair trade practices.
Independent Research:
Investigate Equal Exchange’s financials, track record, and industry trends.
Remember that due diligence involves thorough research beyond official documents, engaging with stakeholders, and seeking independent assessments. Best wishes on your investment journey! 🌱🤝
Deal Terms Prompt:
Thank you for your help in conducting due diligence on the offering for Equal Exchange via https://crowdfundmainstreet.com/campaigns/x5el1q2g#form_c with this Form C https://www.sec.gov/Archives/edgar/data/797046/000079704624000002/0000797046-24-000002-index.htm. I’ve decided to continue my due diligence before investing.
Please explain the terms of the offering. Please answer the relevant questions below but don’t limit your response to those questions.
If the offering is a form of debt, please answer the following questions:
Does the debt have a conversion feature into equity? If so, what triggers the conversion? What valuation cap is set on the conversion? What, if any, discount on conversion is included, vis-a-vis future investors?
Does the debt have a stated interest rate? If so, what is the interest rate?
Are payments fixed to a repayment schedule, or are they based on revenue or some other event?
What is the schedule for receiving payments?
When does the loan mature? That is, when should all payments of principal and interest be paid completely?
Is the offering a form of equity involving a simple agreement for future equity (SAFE)? If so, what are the terms of the SAFE? What triggers conversion to equity? What form of equity will be received? What is the valuation cap, if any? What discount, if any, on conversion is included vis-a-vis future investors?
If this is a priced round of shares, please indicate whether the shares are common or preferred. Describe the features of the shares offered, whether they include voting rights, registration rights or other features. Identify the pre-money and post-money valuation of the business, assuming the round is completed successfully.
Where possible, please provide links to help me verify the information you find. I would appreciate your best efforts to answer the questions.
Copilot’s Response:
Certainly! Let’s explore the terms of the offering for Equal Exchange. Based on the available information, I’ll address your questions:
Debt Offering Details:
Equal Exchange’s offering involves a promissory note, which is a form of debt. Here are the relevant terms:
Conversion Feature into Equity:
The documents do not explicitly mention a conversion feature from debt to equity.
Therefore, there is no specific trigger for conversion, valuation cap, or discount for future investors.
Stated Interest Rate:
The interest rate on the promissory note is 3%.
Repayment Schedule:
The repayment schedule is not detailed in the documents.
Payments may be fixed or based on other factors, but this information is not provided.
Payment Schedule:
The documents do not specify a payment schedule.
Further research beyond the provided documents may be necessary to verify payment timing.
Loan Maturity:
The loan matures on December 31, 2027.
By that date, all payments of principal and interest should be completed.
Equity Offering (Simple Agreement for Future Equity - SAFE):
The documents do not explicitly mention a SAFE or equity offering.
Therefore, we do not have specific terms related to conversion triggers, equity form, valuation cap, or discounts.
Priced Round of Shares:
The documents do not indicate a priced round of shares.
Therefore, we do not have information about common or preferred shares, voting rights, registration rights, or valuation details.
For further verification, you can explore Equal Exchange’s official website1. Remember that due diligence involves researching beyond official documents, engaging with stakeholders, and seeking independent assessments. Best wishes on your investment journey! 🌱🤝
Prospects Prompt:
Thank you for your help conducting due diligence on the offering for Equal Exchange via https://crowdfundmainstreet.com/campaigns/x5el1q2g#form_c with this Form C https://www.sec.gov/Archives/edgar/data/797046/000079704624000002/0000797046-24-000002-index.htm. I’ve decided to continue my due diligence before I make an investment in the company.
Before I invest, I would like to understand the company’s prospects. Please help me determine if the company has the wherewithal to meet the obligations of a note or to grow in value to provide a return on an equity-style investment. For this analysis, please look beyond the offering page and Form C filed with the SEC.
Please include but don’t limit yourself to the following considerations in your analysis:
Operating History: Please comment on the company’s operating history and financial results and their ability to support the proposed investment.
Projections: Please evaluate the projections provided by the company, if any, to determine whether they support the proposed investment.
Competition: Please research the marketplace to identify competition and include business names and websites where possible.
Market Size: Please research the relevant market size to determine how the company fits in the marketplace and has room to grow at or above the industry average.
Where possible, please provide links to help me verify the information you find. Because I am considering a real investment and not merely conducting an academic exercise, I would appreciate your best efforts to answer the questions.
Copilot’s Response:
Certainly! Let’s delve into Equal Exchange’s prospects beyond the formal offering documents. I’ll address each of your points:
Operating History and Financial Results:
Operating History:
Equal Exchange was founded in 1986 with a mission to challenge the existing trade model.
Over nearly 30 years, they have become a leader among Fair Trade food and worker-owned businesses.
The company has grown significantly since its inception, expanding its product offerings and global reach.
Financial Results:
Projections:
Projections:
The documents do not explicitly provide detailed financial projections.
However, Equal Exchange’s consistent growth and commitment to fair trade suggest a positive outlook.
To verify, you can explore their annual reports for more recent financial data4.
Competition:
Marketplace and Competition:
Equal Exchange operates in the fair trade and alternative trade space.
While specific competitors are not mentioned in the documents, they face competition from other ethically sourced, fair trade, and B Corp products.
Their unique cooperative model sets them apart from conventional corporate supply chains.
Market Size:
Market Size:
Equal Exchange sources from over 40 small farmer organizations globally5.
Their products include coffee, chocolate, cocoa, tea, bananas, avocados, and more6.
The fair trade market has grown significantly over the years, and Equal Exchange continues to play a vital role in this space.
For further verification, you can explore Equal Exchange’s official website and annual reports164. Remember that due diligence involves researching beyond official documents, engaging with stakeholders, and seeking independent assessments. Best wishes on your investment journey! 🌱🤝
Risks Prompt:
Thank you for your help conducting due diligence on the offering for Equal Exchange via https://crowdfundmainstreet.com/campaigns/x5el1q2g#form_c with this Form C https://www.sec.gov/Archives/edgar/data/797046/000079704624000002/0000797046-24-000002-index.htm. I’ve decided to continue my due diligence before I make an investment in the company.
Before I invest, I would like to better understand the risks associated with this offering and the company issuing the offered securities. For this analysis, please include but look beyond the offering page and Form C filed with the SEC.
Please consider and analyze the following risks along with any and all other risks you specifically identify with this offering:
Capitalization: Please evaluate whether the company will have the resources to execute its plan if the offering closes, having raised only the minimum goal.
Competition: Please evaluate whether the competition is better capitalized, dominates the market or otherwise could prevent the company from performing or growing at the rate required to meet its targets.
Regulation: Please evaluate whether current or prospective regulations could negatively impact the company as it grows.
Where possible, please provide links to help me verify the information you find. Because I am considering a real investment and not merely conducting an academic exercise, I would appreciate your best efforts to answer the questions.
Copilot’s Response:
Certainly! Let’s delve into the risks associated with the Equal Exchange offering beyond the Form C and offering page. As you’re considering a real investment, I’ll provide a thorough analysis.
Capitalization:
Equal Exchange operates with a radical model that challenges conventional supply chains. They prioritize fair trade and direct relationships with small farmers in tea, cocoa, bananas, and coffee1.
Resource Execution: Equal Exchange’s ability to execute its plan post-offering depends on its financial resources. While the offering may close at the minimum goal, their commitment to fair trade and alternative supply chains may require additional capital beyond the offering.
Verification: You can explore more about their model and financial structure on their website12.
Competition:
Equal Exchange faces competition from other ethically sourced, fair trade, and B Corp products. However, they distinguish themselves by their radical approach and genuine alternative supply chain.
Risk: The crowded market environment often confuses Equal Exchange with other companies, diluting their unique value proposition.
Market Dominance: Assess whether competitors are better capitalized or have a dominant market presence. If so, they could hinder Equal Exchange’s growth.
Verification: Investigate their market positioning, financial reports, and competitive landscape.
Regulation:
Fair Trade Practices: Equal Exchange adheres to fair trade principles, including paying above-market prices and avoiding dangerous pesticides and herbicides2.
Risk: Changes in regulations could impact their operations. For instance, stricter pesticide regulations might affect their sourcing practices.
Impact Assessment: Evaluate existing and potential regulations related to fair trade, organic certifications, and labor practices.
Verification: Research relevant regulations and their potential effects on Equal Exchange.
Remember that investing involves inherent risks, and due diligence is crucial. Verify the information provided through official sources and consider seeking professional advice. Good luck with your investment decision! 🌱🌍🌻
Upcoming SuperCrowd Event Calendar
If a location is not noted, the events below are virtual.
SuperCrowdBaltimore, March 21, 2024: This in-person event at the B&O Rail Museum features some of Baltimore’s prominent citizens and community leaders. Save 30 percent with the discount code “SuperCrowd.”
Impact Cherub Club Meeting hosted by The Super Crowd, Inc., a public benefit corporation, on March 26, 2024, at 1:00 PM Eastern. Each month, the Club meets to review new offerings for investment consideration and to conduct due diligence on previously screened deals. Everyone is welcome to join the free events.
SuperCrowdHour, March 27, 2024 at 1:00 Eastern. Devin Thorpe will explain the three surprising reasons impact investors should seek to make money from impact investing.
Superpowers for Good - Kinect Capital Live Pitch, March 28 at 9 PM Eastern/6 PM Pacific: Four companies currently raising via crowdfunding will pitch their offerings live via the Superpowers for Good streaming television show on e360tv. Kinect Capital will host the pitch. Applications to pitch are open now through March 8!
SuperCrowd24, April 17-18: This two-day virtual event is our biggest event of the year. Don’t miss it. Save 50 percent with the discount code “SuperCrowd.”
SuperCrowdChicago, June 12, 2024. Save the date! More information is coming soon!
Recently, we created an AI GPT to help you learn more about The Super Crowd, Inc., a public benefit corporation, and our upcoming events. Click here to try it.
SuperCrowd Community Event Calendar
Crowdfunding Professional Association Webinar Series - March 13, 2:00 PM ET
Investment Crowdfunding Demystified, Crowdfund Better, March 26 at 2:00 PM ET
If you would like to submit an event for us to share with the 4,000+ members of the SuperCrowd, click here.
Really interesting experiment to help with the heavy lifting of initial due diligence for crowdfunding! Yes, I see some of the issues you mentioned, in particular it had difficulty grabbing an article critical of my investment. But as an augment to our human-based team due diligence, it's great for summarizing and organizing information over numerous pages. Looking forward to future iterations.