Institutional capital approaches technology businesses with a degree of consistency that is not always visible from the other side of the table. However varied their mandates, most professional investors are working through the same underlying questions: what is being sold, to whom, how repeatably, at what margin, and what happens to those characteristics as the business grows.
The first is durability. Recurring revenue is not automatically durable revenue. Retention behaviour, contract structure, concentration and the reasons customers leave say considerably more about a business than the headline growth rate. Investors underwrite the revenue they believe will still be there in three years.
Investors are not looking to be impressed. They are looking to understand what they are underwriting.
The second is quality of growth. Growth financed by increasingly expensive acquisition is read differently from growth driven by expansion within an existing base. The composition matters as much as the number, and the businesses that present it clearly tend to move through diligence faster.
The third is defensibility. In technology this rarely means a single durable advantage. More often it is an accumulation: workflow depth, data, integration, switching cost and distribution. Articulating that accumulation honestly is more persuasive than claiming a moat the evidence does not support.
The fourth is management. Investors are assessing whether a team knows its own business precisely, whether it is candid about weakness, and whether it is likely to behave well when the plan comes under pressure. Very little of that is communicated by a deck.
None of this argues for a different business. It argues for presenting the business that exists with the clarity and specificity that professional capital expects.
This commentary is provided for general information and reflects the views of Wrotham Partners at the time of writing. It does not constitute investment, legal or financial advice.