Test the thesis before you spend on the deal. Investment-grade research, run at origination, not after the term sheet.
The case for thesis validation
By the time a deal hits formal diligence, several million pounds of deal cost is already committed, bankers, lawyers, accountants, internal team time. Decisions about whether to proceed get heavily influenced by sunk cost. The right time to test the thesis is earlier, when the cost of breaking it is small.
Critical Deal investment-thesis engagements run at pipeline or origination stage, sometimes pre-exclusivity, sometimes during. The goal is to get to a verdict on whether the thesis holds before more substantial diligence cost is committed.
What we test
- Market thesis. Is the category growing, stagnating or compressing? Tested against bottom-up sizing and buyer behaviour, not the analyst report.
- Customer thesis. Are the target's customers really sticky, expanding, or about to churn?
- Differentiation thesis. Is the edge durable in the eyes of the buyers, or is it a price story dressed up as a product one?
- Team thesis. Can the leadership team execute the plan? Tested with peers, ex-colleagues, and senior hires of past employers.
- Exit thesis. Who's the next buyer? Strategic, financial, IPO. What does that buyer need to see?
What we deliver
- A thesis verdict, holds, partly holds, does not hold, with the assumptions ranked by exposure.
- The red-flag log, items material enough that the IC should see them.
- The buyer voice, anonymised interviews with the target's actual or candidate customers.
- The market model, bottom-up sizing if part of the thesis.
- An IC summary, short enough to insert directly into the paper.