Lessons from 1,000+ Buy-Side Conversations & More
Over the course of more than 1,000 conversations with institutional investors — spanning VC, growth equity, private equity, and strategic buyers — a clear picture has emerged of what drives interest, what kills momentum, and how the buy-side is evolving its thesis around technology investments.
In today’s environment, shaped by uncertain rates, cautious capital deployment, and heightened scrutiny around fundamentals, the criteria for a successful tech transaction have shifted significantly from the exuberance of 2021. Here’s what we’ve learned in the past year alone against the backdrop of themes that have persisted.
- Revenue Quality Trumps Revenue Size
- Heavy services disguised as "tech" companies
- Customer concentration or hidden churn dynamics
- Physical World Caveat
- The New Growth Formula: Efficient > Explosive
- Process Matters: Winning the First, Second and…Seemingly Third Impression
- Other Observations
- Continued blurring across VC, growth equity, PE and special situations: growth equity and buyout firms increasingly overlapping in their check sizes and target profiles.
- Shift toward capital-efficient growth stories — bootstrapped or lightly funded companies are gaining favor.
- Private equity staying in the fairway (literally and figuratively); however, PE is beginning to move earlier: mid-market PE firms are increasingly acquiring companies at earlier stages (e.g., <$10mm EBITDA), sometimes with minority or structured deals to compete with growth funds.
- Flexible funds are cropping up to solve the need for capital left unfulfilled by a lack of innovation in the marketplace.
- Enterprise SaaS seeing disruption from AI – PE strategies in question.
- Capital raises morphing into dual-tracks and, most often, outright sale processes.
- Start-up salesforce arbitrage opportunities are prevalent but have yet to be written into buy-side playbooks.
- Corporates staying in their respective lanes – limiting adjacent market expansion.
- PE lagging VC with respect to Physical World exposure – in our view, the next mega market of value attainment.
- Industrial software / digital transformation tech underinvestment – ample PE roll-up opportunities across predictive maintenance, modeling and sim, defense, etc.
- The geopolitical climate and global conflicts are causing a need for increased spending in core areas, such as ammunition and defense. Meta’s and Anduril’s collaboration, for example, diminishes the taboo associated with big tech working on military applications.
- Novel Financing Products
- Strategic Risk Financing Solutions - We enable Principals to unlock new financing possibilities with minimum collateral (% is company specific). Through strategic indemnity and competitive risk premiums, Guarantees transform contract security
- Enhanced Deal Assurance Through Risk Bonds - Our insurers issue Guarantee bonds that provide a dual layer of assurance, securing Obligees' interests and bolstering Principals' credibility, thus reinforcing trust in every transaction
- Innovative Funding with Enhanced Financial Leverage - Guarantee Bonds empower Principals to transform bonded contracts into more advantageous financing opportunities, broadening access to lending and credit, optimized for balance sheet
- Bridging Financial Gaps with Insurance Expertise - Merging insurance with traditional finance, we enable Principals to capitalize on Obligee commitments, creating a credit line that's as strategic as it is secure
- Future-Proof Financing for a Dynamic Market - These alternative risk structures are designed for durability, providing Principals with robust, adaptable financing strategies that thrive amid market dynamics
- Final Takeaways for Founders and Company Stakeholders
- Hiring a dedicated, informed investment banker
- Clear articulation of revenue durability and customer value
- Proven efficiency in acquiring and expanding relationships
- Valuation discipline grounded in current (not 2021) market precedents
- A compelling narrative backed by data and humility
The days of “growth at all costs” are firmly behind us (pendulum swings with market cycles). Investors are continuing to place greater emphasis on recurring, contracted, and high-retention revenue. Businesses able to demonstrate strong net revenue retention (NRR), low churn, and embedded customer value are commanding premium interest.
Moreover, revenue mix matters — pure-play SaaS and software-like tech-enabled services outperform businesses with heavy services or customization components, especially when those services drag down gross margin or scalability.
Deal Killers - Despite strong growth or revenue figures, certain characteristics quickly deflate investor interest:
In sectors such as manufacturing, defense, and energy, traditional SaaS metrics like ARR, CAC, or LTV often don't apply in any meaningful way. Outside of pure software plays, success is measured by production throughput, programs of record, design wins, offtake agreements, and hardware-software bundled sales.
Do not let VCs (specifically those who ignore how physical industries actually operate) impose a one-size-fits-all SaaS framework onto businesses transforming the real world. Push them to underwrite a thesis based on actual industry value drivers — and benchmark it the way public markets do — e.g., Nvidia, Apple, and Tesla (Eclipse Ventures).
While investors still value growth, it now must be paired with capital efficiency. The “Rule of 40” (comparing R^2 to that of “Rule of 100” can provide a temporal indication as to the collective predilection for growth vs. profitability) has become a shorthand litmus test, but beyond that, investors want to see proof of scalable unit economics — fast CAC payback periods (for CAC-appropriate businesses), improving contribution margins, and a path to profitability. Burn multiple and sales efficiency are front and center.
Companies reliant on ongoing capital infusions to fuel growth — without clear visibility to breakeven — face steeper skepticism.
Investor behavior during the outreach process is often confounding and misinterpreted. Many firms sign NDAs or request a deck out of curiosity or optionality — not commitment. Teams that fail to deeply qualify interest early correlate highly with wasting time.
Additionally, investors are suffering from teaser fatigue, highlighting the importance of a highly curated investor / acquiror list and game plan at the outset of a process. The sell-side has 1 minute to make a mark - what stands out is clear articulation of market leadership, product differentiation, and measurable financial traction — not buzzwords or generic boilerplate.
The importance of founder storytelling and a strong, presentable management team cannot be overstated. Buyers consistently gravitate toward teams that can explain not just what they’ve built, but why it matters — with humility, experience and data in hand.
Fritz & Co. circumvents buy-side teaser fatigue with accompanying teaser videos, which more optimally convey opportunities with the added benefit of entertainment value, keeping audiences engaged.
We are working with strategic partners ($20bn market cap insurance intermediary & other partners) to provide access to unique alternative financing and insurance-related options including risk and bond financing, to provide or assist in securing deal funding:
If there’s one macro lesson from 1,000 conversations, it’s this: capital is no longer cheap, but high-quality businesses are still very much in demand. Success in today’s market comes down to:
The market has matured — and so must the pitch. Investors want more than just a promising story. They want proof and their ADD requires it quickly.