Investing as Owners Means We Take a Long-Term Perspective

How We Assess Opportunities:
The TDM Four Pillars Investment Framework

This framework creates a shared language to understand and compare portfolio opportunities.

Our assessment is focused on the current and future state and strength of each pillar. For instance, a legacy software provider may indeed be the incumbent leader trading at a very attractive valuation, but on a five-year view may experience little revenue growth given its flat or diminishing competitive advantage.

At the core of every investment thesis is an analysis of:

We look to own great growth companies for long periods of time.

Our returns are primarily driven by top line revenue growth in our portfolio companies, which usually have little or no debt on the balance sheet. Our hurdle rate of return is 20% per annum and this is a good proxy for the rate of growth for each of our portfolio companies.

Growth Opportunity is further segmented by:

Large or Growing Market

We look for long-duration growth opportunities, typically in large and growing markets.

Experience Market Fit

The extent to which a company’s product or service satisfies the customer experience of the addressable market.

Friction of Adoption

How easily and how quickly customers derive utility and value.

Vitality

The extent to which a company can successfully extend its TAM.

The primary framework we use to discuss competitive advantage is Hamilton Helmer’s 7 Powers.

The 7 Powers Framework outlines seven non-mutually exclusive sources of competitive advantage: scale economies, network economies, counter position, switching costs, branding, cornered resource and process power.

Given the importance of people and culture to long-term business outcomes, it is its own pillar. In fact, at TDM we think of People and Culture as the 8th Power.

Scaling culture, from its infancy to many thousands of employees, is one of the largest barriers to enduring growth, making it one of the most important sources of competitive advantage.

Our people and culture analysis focuses on competence and character of the CEO, board and executive team and the alignment of culture to the mission of the business.

PERSPECTIVE

We are growth investors.

In the public markets, we look to buy shares in companies that at times will suffer from a dislocation between a fair value and the current market price.

In the private markets, we look to pay a fair price that will allow us to compound capital at high rates for very long periods.

PERSPECTIVE

Read more in, ‘Four Pillars: How We Assess Enduring Businesses’

Current TDM Portfolio Criteria

Our criteria balance our flexible mandate with purposeful constraints to drive successful investment outcomes.

We believe that great companies can be found in any sector or geography.

We invest globally in both public and private businesses that can grow organically at greater than 20% per annum over the next five to seven years.

In the private markets, we invest in late-stage businesses that have already seen strong product market fit (>$50 million in revenue) and are scaling towards the public markets on a five-year horizon.

When it comes to public companies, our journey can begin at IPO as a cornerstone investor, and often is more simply defined as being a supportive long-term shareholder during times when the stock price may not be trading favourably relative to our assessment of fair value.

Our current portfolio companies operate in Australia, North America, Europe, and Asia, and are focused in the consumer, technology, and healthcare sectors.

We invest $75-300 million per portfolio company, and often increase our investment size over time, including at or following an IPO.  

Our investment size per portfolio company is a consequence of our concentration and fund size. As our fund size grows, so does the amount we target investing per company. We have only ever been minority owners. 

We align with CEOs, management teams and boards who: 

  • understand the importance of scaling their people and their culture, 
  • want to be deeply incentivised to create long-term value for all shareholders, 
  • value constant improvement and growth (both personally and for the business), 
  • have a track record of making difficult decisions, and 
  • are open to actively working with us as partners. 

We seek distinctive cultures aligned to a common mission. These businesses have management teams who believe that the source of their strongest and most enduring competitive advantage is their people and the scaling of their culture.

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