The TEB team adheres to clearly stated policies and procedures that govern the administration of the “deal” flow, due diligence examination and the investment decision process. This approach ensures that each new investment conforms closely to the investor’s strategy, that key criteria are rigorously applied, that concerns are adequately addressed and that potential returns are commensurate with risk. The key elements of the investment process are initial screening, company analysis, the investment decision and post-investment involvement.
All investment opportunities are reviewed by the TEB. The TEB follows up on that opportunity with the company. Opportunities that pass the initial gate are briefly discussed in the regular meetings, where questions, issues and concerns are raised. At this juncture, the team evaluates the company on three criteria: market potential, strength of technology, and background of the company team.
Companies/organisations that the TEB decides merit additional review are assigned to one of the members. This person leads the diligence effort, focusing on addressing the questions and issues raised by the group, perhaps having multiple calls or meetings with the company, outside technical experts and potential customers. If the TEB member continues to be interested in the opportunity, he prepares a 3-5 page “project profile” memo that addresses the results of this initial diligence and recommends that the opportunity be considered at the next level.
After reviewing the project profile memo, the opportunity is discussed and may be approved for deeper diligence. The team then completes thorough analysis of the opportunity with particular responsibilities assigned to each manager, following a carefully prepared project plan specific for each company that takes into account all relevant information and attempts to elucidate all the factors that may affect future success. This analysis may include a review of the company’s management, technology, strategy, development plan, markets, competitors, cost structure, patents, financing requirements, syndicate partners and deal terms and structure. Where appropriate, the TEB member engages the ISB and QSP to more thoroughly review particular issues. A key element of the analysis is a clearly defined and realistic exit strategy. A careful forecast of expected returns covering several likely exit scenarios is made.
After completion of due diligence, the team carefully review the reference checks and other findings. The decision on the investment follows. An investment decision may also be made subject to the completion of additional diligence issues or fulfillment of various other conditions. A change in the term sheet, filling out of an acceptable investment group or the successful recruitment of key members of management are examples of possible conditions of investment the team may set.
After an investment is made, the TEB become actively involved with the company, devoting significant time and a wealth of experience to accelerate value creation in each of its portfolio companies. The TEB member leading the investment typically takes a seat on the company’s board of directors and may recommend a knowledge transfer partnership, that is a graduate from a partner university, be placed. The team provides a great deal of assistance to portfolio companies by identifying and recruiting senior executives (which may include the CEO), defining and addressing key strategic and organizational issues, designing incentive compensation plans, providing introductions to industry experts and potential corporate partners, and assisting with financial strategy and capital raising.
In addition, the team carefully monitors each investment. The team briefly discusses progress at each company at the board meetings, and then intensively reviews the entire portfolio -- company by company – on a regular basis to ensure that investments are achieving their potential and to target any company not meeting milestones and/or budget forecasts or needing additional assistance. At each of these reviews, the team reviews the progress of each investment, and identify key operating or financing issues facing individual portfolio companies.
In all of its investment decisions, the TEB stresses active involvement, company sustainability and reliable valuation.