Simon Franklin, Managing Partner of Dequity Partners was honoured to have been asked by the RegTech Association of Australia to judge their awards for Best Pitch from a plethora of regulatory technology companies eager to gain exposure and potentially investment. This is something he really enjoys and was very excited by the process.

Dequity Partners see hundreds of pitch decks, term sheets and investment memorandums each year, so here’s what we look for.  We are sure you will have your own process, ours is quite fluid as we never know what will come through the door.

Round 1 – The Basics:

• Investment idea;

• Key risks and how will they be addressed;

• Depth of experience of the management team and how they are aligned;

• Advisory team or board members;

• Ability answer questions, to take feedback and constructive criticism;

• Pitch deck quality and clarity;

• Existing investors and their motivations;

• Valuation model and assumption testing;

• Clarity of use of funds;

• Due diligence ready and accessible.

Round 2 – Likeability Test

If we are satisfied with the answers to Round 1, they pass through to Round 2.  A personal note here – no matter which way we go (in or out), we always thank the pitcher for approaching us, provide as much feedback as possible and keep them in mind for a later date. We are very clear if we can help or not.

The thing most people seem to miss, that we focus on where others may not, is likeability and excitement:

• Do we like the concept?

• Do we like the people involved?

• Does this excite us enough to invest time, energy or money in?

It’s surprising how many potential deals fail to make it past this stage for a host of reasons.  We know a lot of investors and funders play the numbers game and are distant, dispassionate and professional if the investment meets their criteria. Dequity Partners however take a personal approach to everything we do, so it’s important for the team to enjoy ourselves along the way.

Round 3 – The Deal

Then; and this is the clincher:

• What’s the deal?

• How can we and our investors make money from this?

• Can this be leveraged with other investments?

• Does it fit with our ethical standards?

If they make it to Round 3, the work really starts. This is the structuring side, deal parameters, timescales, options, legal agreements, mandates and execution plan. We’ll leave this here as it gets complicated and we can share this in a later post.

Final Point

We don’t focus on the somewhat ugly term bandied about all the time which is “founder skin in the game”.  From experience, the majority of founders we deal with have invested their own money, friends and family’s money, time and reputation to get this far.  Most have had to look into the eyes of loved ones and say, “the money’s running low” or “scrap the holiday”.

To ask them for more, starve them of their lifestyle and put their entire family life at risk to feel they have “skin in the game” seems a little unfair. What we look for first is alignment of objectives. It’s a subtle difference and one that many people overlook. Full alignment of future objectives, mutual trust and working towards something together is our goal.  It hasn’t let us down yet.

Dequity Partners are available to assist and advise on a range of direct equity investment opportunities.  Please call on +61 2 9258 1972 or go to our Contact page.