Addie Pinkster is the Founder and Chief Executive of Adelpha, a female-led corporate financial advisor and leading investment network, that specialises in high-quality, fast-growth, UK-focused companies. Prior to that, she spent 15 years in investment banking, most recently as Head of Hedge Fund Strategy at Citi. She is also a NED, and a growth & tech investor.

SyndicateRoom Co-Founder, Tom Britton, spoke to Addie about her experiences in finance, what matters to her when it comes to choosing companies for investment, and what investors should consider before deciding to invest.

We highly recommend listening to the full conversation

Or, for some rapid insights, here are three key takeaways from the conversation:

1. When it comes to pitching, choose realism over posturing, facts over exaggerations, show that you are an effective team that can execute, and make sure you have a realistic grasp of the numbers.

Addie: “It needs to be a sector that is undoubtedly, absolutely going to permeate everything we do. For example, Metaverse living and carbon removal and clean tech are so obviously going to be huge. Then we're looking for niches within that sector that aren't already quite well played. So it has to be somewhere where we have edge and we're not competing against the world and his wife to talk about it or to invest in it.

Then we come down to the company itself, and we have a qualitative and quantitative analysis sheet. It's not the sort of “add up the numbers and if you get over eighty, you get an investment”. But it does make sure that we actually think and ask the questions that our unconscious bias may encourage us to forget to ask of a company that we really like.

The first thing is we're really intolerant of red flag behaviour. We look for it from first meeting: exaggeration of statements, comments, those sorts of things are not good. We want realism. I'm much more someone who wants to see people with make-up off to see how they face adversity than to see the polished pitch.

reflecting windows

I do see some investors on the private side who really lean into polish pitches and bravado and I think they're missing a trick in terms of their portfolio management for that. But equally, they do need to be able to pitch. It is such a difference working with a CEO or founder who can actually tell their story day in day out, whether they're in the pub on a Friday, or in a big meeting or a small meeting. We really like to see governance. But I think above all, we want to see execution and I think you can assess that from the very first meeting.

Normally something comes up in the first meeting that we want to see more on. It already gives you an idea of what their internal systems look like behind the scenes, and that is really indicative of how they run the company, and even how they present. They don't need to be super polished to us. But especially in a b2b or SaaS company, they will be facing big organisations all day. So someone who can present cleanly and well: I like a professional outfit, that helps a lot.

Then it is about team and it's a real blend there: do they have the right people? Do those people look like they're productive? I'm never crazy about founders and CEOs who talk about “I” all the time.

Even after we've done all the assessments and evaluation – what matters to us a lot is really strong financial capabilities within the company. Especially for first-time founders. The idea in the spreadsheet’s rough model really isn't that proper allocation of resources for customer success. If you're looking at high growth by two to three I want really big contingency lines on costs. I want extra run rooms going into predicted rounds, just classically, especially the first time, it always costs more than you think, and making sure that's properly budgeted and understood is helpful.”

2. The G in ESG is vital at the early stages of starting a business.

Addie: “The E and the S in ESG are both about doing the right things morally and having impact. But the G – Governance – is paramount to running a good business properly. In particular, having a board with independents on it is probably the single biggest lever that a high potential company can make to achieve what they're capable of in the first two to three years.

From day one, and especially early, you want a board and it can't be your mate and it can't be people who have the same skill set as you and the same background as you. So classically, if we see someone who worked in strategy at L'Oreal setting up a company, they're starting board generally tends to be other people they worked with at L'Oreal. And you need to actually have to have someone who's finance, someone who's law, different personality types, and try and meet once a month, even if it's quite informal. Just try and meet once a month and say this is what we think we're gonna do next month, this is what we've achieved. This bit feels good. But actually this bit’s not so good, has anyone got any ideas or thoughts or help? Holding yourself to account is really helpful.”

3. If you’re considering an investment, ask yourself these five questions.

Addie: “Whether someone's a new investor or a pretty experienced one, a return comes down to five main questions and one tag-on question. The five main questions are what price do I get in? What price do I get out? How long will that take me? What do I think is the execution risk of achieving that? And how diluted might I get? If you can get yourself comfortable on those five questions – and by the way, there's only two that you can really influence right now, which are what is the valuation and the execution risk – that should give you a pretty good idea of whether you want to invest or not, and also how to size it.

Then the tag-on question is, will I enjoy this journey, and will I be proud of it? That's so important. Trail sold last year and every investor in it absolutely loved that trade. It wasn't a multi 10X return for anyone, but the company did what they said they were going to do. They communicated well with shareholders, they built a b2b SaaS product of quality, they said they were going to sell, they sold. At the end of it, there was just a massive metaphorical round of applause from investors. Whereas I can think of another investment I'm in which was sort of 10X return in the first two years, and most people don't want to be the same room as the founder. So there is this extra element on top of will this be something that's enjoyable for us?"

Read more about SyndicateRoom’s unique data-driven approach to investing in startups here, follow us on Twitter here and follow Addie here.

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