A developer sends a teaser with a 14 per cent equity return and hears nothing back. The instinct is to conclude that the return was too low, or that the investor was not the right one. Usually neither is true. The number was never the issue. What the investor could not find, in the time they were prepared to spend, was evidence that the number would survive contact with delivery.
Capital works backwards from risk, not forwards from return. Six things tend to decide whether a project moves from a first read to a second meeting.
Site control
An option agreement, a lease or a heads of terms with a named landowner. Not a relationship, not a conversation, not a site that looks suitable. Where site control is partial, say so and say what remains outstanding. Investors discount uncertainty they can measure and walk away from uncertainty they cannot.
The grid position
This is now the single most examined item in most markets. A connection offer with a date, an accepted agreement, a queue position with a defensible route to acceleration: each carries a different value, and conflating them is the fastest way to lose credibility. If the connection date sits beyond the horizon of the fund you are approaching, the conversation is over before the model is opened.
Route to market
Contracted revenue, a support mechanism, a corporate offtake or an explicit merchant position. Any of these can be financed. What cannot be financed is an unexamined assumption that an offtake will be available on terms similar to today's when the asset energises in four years.
A defined requirement
The most common weakness in submissions is a capital requirement expressed as a range, without a use of proceeds. Fifteen to forty million pounds tells an investor that the project has not been sized. State the amount, the instrument, the milestone it funds and what happens at the end of it.
A model that survives scrutiny
Not an elaborate model. A model whose assumptions are traceable, whose sensitivities reflect real downside rather than a ten per cent haircut applied to everything, and whose inputs match the documents supplied alongside it. Inconsistency between the model and the data room is read as carelessness, and carelessness is read as risk.
A team that has finished something
Investors underwrite people as much as assets. A team that has taken a comparable project through consenting, financing and commissioning has an evidenced answer to the question of what happens when something goes wrong. A team that has only originated has not.
The uncomfortable conclusion
Most projects that fail to attract capital are not uninvestable. They are premature. The work required is not a better deck. It is closing the gaps that make the deck unnecessary.
This article is general commentary. It is not investment advice, a recommendation or an offer, and it does not take account of the circumstances of any particular party. Juliet Rose Capital introduces only and does not provide advice on investments.