Conviction Before Capital

The year has opened with renewed focus. After the holidays, the market feels more purposeful. Capital is re-engaging, not to speculate, but to underwrite. Attention has shifted from narratives to evidence, from timing windows to readiness. For disciplined investors, this is typically where conviction is either built or withheld.

From that vantage point, transactions fail less often on valuation than on risk left unpriced. Not because issues surface suddenly, but because uncertainty accumulates, unanswered.

How conviction erodes

Most processes do not break. They weaken.

Latency in responses, evolving numbers, unclear ownership of facts, or subtle narrative shifts are all read the same way: information asymmetry. Each signal increases perceived downside and pushes compensation into structure, timing, or governance.

The underwriting question remains constant:
What am I implicitly trusting today that I will regret having trusted six months after close?

How value is actually underwritten

Multiples are reference points. Underwriting is about cash-flow durability adjusted for uncertainty.

Conviction increases when cash flows appear repeatable, explainable, and within managerial control. When they do not, risk migrates elsewhere.

Price rarely moves alone. Structure does the work.

What readiness looks like from the buy side

Readiness is not cleanliness. It is transferability without reconstruction.

The test is whether conviction can be reached without stopping to rebuild the fact base.

Two conditions typically determine momentum:
• Valuation anchored in verifiable evidence
• Diligence answered quickly, consistently, and without reinterpretation

Where this shows up most clearly:
• Performance clarity with stable definitions and reconciled results
• Operational independence from any single individual
• Risk visibility that is explicit, bounded, and documented
• Data discipline with version control and auditability
• An equity story that remains coherent under repetition

Revenue quality as a risk signal

Revenue is not underwritten at face value. Its structure is.

Concentration, renewal behaviour, pricing power, pipeline conversion, and dependency patterns are read as indicators of durability. Apparent momentum that increases fragility is priced accordingly.

Two workstreams tend to anchor conviction:
• A customer and revenue view that reconciles cleanly to the P&L
• A pipeline and forecast view with objective stage definitions and historical conversion behaviour

Key person exposure

Founder energy is not the issue. Founder indispensability is.

Where relationships, approvals, pricing, or escalation paths concentrate, risk remains unpriced unless explicitly addressed. Mitigation shows up through delegation, documented decision rights, and customer-validated continuity.

Absent that, structure compensates.

Diligence as confirmation

When the fact base is incomplete, investors default to conservatism.

Preparation replaces reassurance with independently verifiable proof. The faster that proof is accessible, the less adversarial the process becomes.

Data discipline directly protects value:
• Revenue reconciled by customer
• Stable gross-margin methodology with clear bridges
• Locked KPI definitions
• One source of truth with controlled Q&A and version history

Why structure carries more weight than headline price

Price signals interest. Terms express conviction.

Where confidence is high, structure simplifies.
Where it is not, risk is reallocated through earn-outs, escrows, holdbacks, deferred consideration, or governance constraints.

The objective is not optimism. It is bounded exposure.

Preparation horizons

Most risks cannot be resolved during diligence. Readiness is built over multiple reporting cycles, not deal weeks.

Near-term windows favour proof and containment.
Longer horizons allow transferability and track record to compound.

Both require sequencing and ownership.

A discipline that consistently improves outcomes

Run a pre-mortem early.

Assume the transaction fails late. Identify what broke conviction. Define the evidence that would have prevented it. Address or bound the highest-impact uncertainties.

The strongest processes resemble operating initiatives: clear ownership, weekly cadence, a single fact base, and accuracy over speed.

I’ll be on the road over the coming months, largely around conversations where underwriting, risk, and conviction intersect. If our paths happen to cross, even briefly, it would be good to connect.

• Jan 19–20: ICE Conference, Barcelona
• Jan 27–30: London
• March 9–11: Speaking at MoneyLIVE, London
• March 16–19: Speaking at Merchant Payment Ecosystem, Berlin
• Late April (likely): Zurich
• June: Money20/20 Amsterdam

If you are quietly underwriting a situation this year, or simply want to pressure-test readiness from an investor’s lens, I’m always open to a thoughtful conversation.

Tom C. Schapira
Founder and CEO
Imagine Capital Group
E: [email protected]
Website: http://www.imaginecapitalgroup.com

Securities Offered through Wellesley Hills Securities. Member FINRA/SIPC