What Rosary Capital looks for before investing

Early-stage investing inevitably involves uncertainty.

If every important question about a company had already been answered, it would probably no longer be an early-stage investment.

There may be limited revenue, a small team and a product that has only recently entered the market.

The role of the investor is therefore not to eliminate uncertainty.

It is to decide which uncertainties are worth taking.

At Rosary Capital, we begin with the founder.

Ideas change.

Products change.

Markets certainly change.

The quality of the people making those decisions therefore has an enormous bearing on what ultimately happens to the company.

We look for founders who understand the problem they are solving in considerable depth.

There is a noticeable difference between somebody who has identified an interesting commercial opportunity and somebody who has lived with a problem long enough to understand why existing solutions have failed.

We prefer the latter.

We also look for evidence that a founder can listen.

This may sound inconsistent with the traditional image of the relentlessly determined entrepreneur.

It isn't.

Determination is essential. Stubbornness is not.

The best founders can hold a very strong view while remaining willing to change it when customers or evidence prove them wrong.

After the founder comes the problem.

We are particularly interested in businesses addressing genuine commercial problems within financial services and adjacent markets.

The question we ask is straightforward: if this company disappeared tomorrow, would its prospective customers actually care?

Technology businesses can be very good at creating solutions before establishing whether the underlying problem is significant.

We would rather invest in a relatively simple solution to an expensive problem than an extraordinary piece of technology looking for a reason to exist.

Then we consider the customer.

For early-stage fintechs, evidence of customer interest is particularly valuable.

That does not always mean revenue.

A carefully designed pilot with the right institution can tell us a great deal. So can repeated conversations in which different organisations independently describe the same problem.

What we want to see is movement away from the founder pushing a proposition towards customers beginning to pull it.

Commercial potential matters because the environment is unusually strong.

The Square Mile is already home to more fintech SMEs than any other UK local authority, while the UK continues to attract considerable international investment into financial and professional services. That provides early-stage financial technology businesses with a sophisticated domestic market in which to build.

But access to a large market means little without the ability to sell into it.

That leads to another important question: can this business become credible enough for institutional customers?

For companies selling into regulated financial services, the product alone is rarely sufficient.

We want founders to think early about security, compliance, data, financial controls and operational resilience.

We do not expect an eight-person company to behave like a global bank.

We do expect it to understand why a global bank asks the questions it does.

The FCA's work with high-growth companies has similarly highlighted the value of early investment in governance, risk management and controls.

We also consider whether Rosary itself can be useful.

This is important.

There are businesses that may become excellent investments for somebody else but where our capital adds relatively little beyond the money itself.

Those are not necessarily the right Rosary investments.

Our approach is built around the City of London and the networks surrounding financial and professional services.

We are therefore particularly interested in companies where introductions, institutional understanding, commercial guidance and access to experienced people could materially improve the company's prospects.

Capital should be active without becoming intrusive.

A founder still has to run the business.

The investor's role is to increase the quality of the decisions available to them, open doors where appropriate and provide support when the inevitable difficult periods arrive.

Finally, we look at ambition.

We are not interested in growth for the sake of a valuation announcement.

We want to know what the founder is trying to build.

Could this become an enduring business?

Could it employ hundreds of people?

Could it expand internationally while maintaining a meaningful base in Britain?

Could an organisation that is almost unknown today eventually become part of the City's financial infrastructure?

Those are difficult questions to answer at seed stage.

That is precisely what makes early-stage investing interesting.

Rosary Capital exists because we believe there are very good entrepreneurs building businesses in and around UK financial services who need more than a cheque.

They need patient introductions, institutional access, commercial challenge and investors prepared to help them navigate the journey from an early product to a serious company.

We will not always get the answer right.

No early-stage investor does.

But we can be disciplined about the questions we ask.

For us, the most important is not simply whether a company could become valuable.

It is whether there is the beginning of something worth building for the long term.