Investment Process

Dealflow

The Management Team and Advisory Panel are and have been associated with many successful fintech businesses in Europe and beyond. This track record and experience act as a magnet to emerging entrepreneurs and have allowed them to develop strong networks at the centre of the fintech ecosystem including the incubators, seed funds, angel networks and venture capital funds.

This network of contacts, cultivated over many years, leads the team to be confident that it will see many of Europe’s most attractive fintech investment opportunities. One of the biggest challenges is to effectively curate this deal flow, negotiate reasonable terms and select the right opportunities to invest in.

Process

The first contact with a potential investee company will be directly through a member of the Management Team; this should enable the Management Team to quickly progress or reject an investment opportunity on behalf of the Company.

Since the launch of the Partnership, the Management Team has received approximately 1,200 leads, of which 121 met the required investment criteria, resulting in seven final investments. 

The Management Team reviews the initial information describing the business. If it is deemed of interest, the team will arrange a call or meeting with the founder to understand more about the business. If still of interest, there will be further meetings with the founder and wider management team.

Concurrently with these meetings, the Management Team will undertake due diligence, including reviewing business plans, management accounts, board packs, capitalisation tables and shareholder agreements.

If the opportunity continues to be of interest, the Management Team will broaden discussions internally and reach out to its network which may have angel/seed or venture investments in the business or may otherwise be familiar with it.

These three streams – meetings, materials and feedback – are part of the commercial and financial due diligence process.

From this, if the Management Team still likes the potential investment opportunity, it will develop an investment case and prepare a formal proposal including an investment thesis and outline terms of the deal.

If the investment committee of the Investment Adviser or, following the Portfolio Management Agreement becoming effective and the New Portfolio Manager being appointed, the New Portfolio Manager approves it, the Management Team would then issue a term sheet to the potential investment opportunity.

If the investee company accepts the offer, the Management Team engages legal advisers to perform legal due diligence and draft and negotiate investment documentation.

Whilst there is no set timetable, it would typically be not be less than two to three months from first meeting to investment and in some cases, where a company is met at an earlier stage than the Management Team would want to invest, the relationship can be built over a period of years with the Management Team receiving regular updates throughout, all of which forms part of the due diligence process.

Active management of the portfolio

The Company will be an active investor. In the vast majority of its investments, the Management Team will require a board seat as a condition of investment. The Company intends to limit the number of active board seats that each member of the Management Team may hold at any one time and expects them to spend at least two days a month helping each investee company for which they are responsible. The Company also encourages regular involvement of other members of the Management Team in investee company meetings and reviews to ensure an appropriate balance of views at Management Team meetings.

There are a number of key areas where the Management Team believes it is able to add value to the portfolio companies and has done so for other investments in which it has been involved. The Management Team believes that the first 100 days following investment is a time when it can have the most impact and exert positive influence. Although the Management Team is not executive in the management of the investee businesses, it does take on an active non-executive role, at the same time maintaining the distance necessary to keep perspective of the greater goal of value enhancement.

Help scaling the Management Team
Team scaling is one of the greatest challenges faced by high growth fintech businesses and significantly impacts the chances of success. The Management Team offers consultation and assistance in helping recruit senior management team members and board members for the investee companies. This includes non-executive chairmen and directors, chief executive officers and senior positions in finance, marketing, technology, product, commercial and other positions. The Management Team is particularly focused on ensuring the portfolio companies have the right team in place for each stage of their development.

Refine and drive the key performance indicators
The Management Team spends a significant amount of time working with management of the investee companies to identify the key drivers of value and ensuring that the strategy and performance monitoring is built around these drivers. Typically the Management Team expects there to be no more than three to six of these drivers.

Organic growth and acquisition
The Management Team is focused on assisting investee companies to achieve organic growth as a core investment strategy. However, organic growth can often be complemented by acquiring further products, development skills or sales and distribution capabilities as well as roll-ups of competing businesses. The extensive network of the Management Team helps to identify and secure these opportunities.

Business development/market entry
The Management Team provides support to the investee companies to develop new business development activities, helping to identify and negotiate channel partnerships and other strategic and tactical opportunities. The members of the Management Team also have long histories of helping investee companies to expand into international markets.

Dealing with underperformance
With periodic business reviews and close and regular contact with the management teams, the Management Team is well placed to identify potential problems within the Company’s portfolio at an early stage. Where possible, together with management of the investee company, the Management Team will endeavour to secure change at board, management and/or operational level as necessary.

Investment exit review
The Company will review exit opportunities regularly and each member of the Management Team will be responsible for an exit thesis for their respective investee companies, which is set out in the original investment papers prior to any investment being made.

Determining the exit thesis prior to an investment is an important stage in gaining the commitment of the management, board and co-investors to a common plan. Thereafter, the Management Team seeks to actively manage this exit process by participating on the portfolio company board, and using these management meetings to promote open discussions within the investee company.

The Management Team endeavours to be an active participant in any exit process. This includes involvement in the formation of strategy, appointment of advisers and/or often negotiating directly with potential acquirers or investment banks as necessary.