A guide for In3 Registered Affiliates, Staff and Joint Venture Partners
Success comes from going deeper, not wider.
The purpose of evaluating, assigning and conveying Feasibility Scores is to serve as a benchmark and communication tool to expedite action, clarify intent, highlight strengths and issues, and provide a way to improve results over time.
Start by calibrating what is a 5 and what is a 1, using your best interpretation of the guidelines presented below. What’s the best possible client scenario you can imagine? That’s a 5. What’s the worst? That’s a 1. Note these definitions for yourself or your team, so you can highlight rationale, including times when you have no idea if they are either of those extremes (defined as a 3 score, sometimes the place to start) or most of the time, when there are obvious strengths weighed alongside weaknesses/issues you would highlight to explain why you’ve assigned a lead’s given score.
For example, for a project/developer you deem “hot” (at or close to a 5), why would you assign a higher score relative to those you assign a lower score? Might that lead have an excellent chance of receiving funding without taking much time to prepare or revise materials, without the need for extensive coaching to provide essential pre-qualification information, one that has built a strong project plan and summary (including MS Excel financials), presenting a proposal of the utmost quality and efficacy, with a management team that has an established track record of success?
To be a 5, the lead must not just make claims, but also must substantiate those claims with evidence that borders on proof. Such “proof points” are part of the due diligence materials and the storytelling includes offering access to support materials so the funder doesn’t have to ask questions about the basics — we can find answers on our own, demonstrating that the client has done this before and was able to anticipate what matters.
In this idealized example, a 4.5 or 5 score then delivers a streamlined way to set and manage expectations, and focus our attention to accelerate decision-making and push such a client to the front of the line. Review the simplified steps to pre-qualify for In3CAP funding.
There are at least three players in each lead generated, the client, yourself or your team as an agent (an In3 Affiliate or introducing party), and In3 as gatekeeper/capital provider. Feasibility Scores, used consistently and honestly (no need to “fluff up” a lead to get extra attention … surely that would backfire) benefit all three participants by supporting more focused and effective communication and learning, reaching more financial closings in less time, ultimately making you more productive.
Simply assign a score from 1-5 for FEASIBILITY as follows:
- Score of 4-5 means client is coachable, deal terms within reach, projecting adequate financial returns (IRR), seemingly able to bring the first 4 out of Six Essentials for In3CAP funding, or at least 25% cash or approved alternative as a deposit for equity or debt. Verify (check assumptions) then expedite these.
- Score of 3 means these factors are uncertain. Investigate further.
- Score of 2 means deal terms and/or IRR are not workable. Repair these, if possible. Up or out.
- Score of 1 means client is not coachable (the party asking for funding is without the ability to learn and/or communicate), thus the developer is not qualified as a client. Ditch these (put them off, ignore, refer to someone else, suggest therapy or a new line of work).
Key to Feasibility Scores
- Ditch
- Repair
- Investigate (adjust score up or down based on clarified facts)
- Verify
- Expedite (fund these first)
Let’s DRIVE!
Instructions by Score for Assigning and Using Feasibility Scores to DRIVE funding
CAP funding is relatively forgiving, so any client that fits our basic screening for size, sector and location (and building a physical project vs. commercializing intellectual property, for example) and has agreed to satisfy our Security requirements — guarantee or cash deposit — deserves at least a 3. Commercial risk is still a gating factor (otherwise there is no way of knowing if the project itself is a feasible business), but the other risks like Political/Country risk, credit risk, counterparty (such as the hired EPC) risk, execution risk, etc., are unimportant.
At least a 3 score applies even when incoming projects have solvable challenges that have prevented funding so far — such as if the project’s technology is “First of a Kind” (FOAK), where traditional project financiers would see that as a huge risk and typically would refuse to make any sort of offer. CAP funding’s protocols rely more heavily of the client’s performance to pre-qualify, then we remain largely agnostic about a host of factors that traditional funders use to make fast decisions — usually they say “no” when such conditions exist, including little “skin in the game” by the developer and/or no unexpended cash to put into the deal. CAP funding thus relies more heavily on your calibrated assessment of 1-5 feasibility, where the main consideration is Security as either a Completion Assurance Guarantee or ~25%+ cash deposit.
Still, the project developer and management team must be able to deliver and substantiate (defend) an actionable proposal, thus we expect clients to communicate well, know their industry, have prepared a solid plan (to show little or no commercial risk) and pass the sniff test for basic honesty, integrity, and reliability. If they do not, even when the project itself has merit, they would deserve to score below 3:
1. Ditch: Extremely Unlikely client can perform – project representative not coachable or does not communicate well enough to tell if they have a serious opportunity.
- Defining “Uncoachable” — If the client has exhibited signs of being uncoachable, and is either too difficult to understand in writing or verbally, or just doesn’t listen/learn/care (cannot let in new information after multiple tries), or is so headstrong and obnoxious, abrasive and unpleasant, or belligerent and set in their ways … that progress is hampered. This is part of the “sniff test” mentioned above … there is a fine line between confidence and arrogance. Thus, watch also for signs of sociopathy, such as extreme attention-seeking combined with characteristics of paranoia, delusion, an aggressive mood mixed with a lack of self-awareness, a tendency toward deliberately lying (for the sake of manipulation, or “bending” the truth), versus being on the more common Asperger’s/autism spectrum, exhibited by an extreme lack of social skills. Or is the lack of teamwork (that they seem uncooperative), simply because they have not yet mastered English and thus do not understand our guidance, coaching or requirements? Be slow to make any judgements in this regard. Watch and witness behavior over several interactions or social settings before drawing any conclusions.
- Recommendations: First, advise client to add or appoint a team member that can represent their interests to overcome the perceived limitation, and offer to resume discussions with that new party on the team. If they do not have English language competence, attempt to find out what is their native language, and if their English is unintelligible, suggest a course of further English study or accent reduction? If we or they can involve someone in their native language, or who can translate during pre-qualification (all written materials are to be in English), that may help them become more coachable. So much of this work is about communication, this can be a real sticking point. Together, their team either delivers the requested information to raise their score (if all goes well) or we will need to just say “no” and explain why we are unable to proceed, making sure it is clear to them why we are refusing to work with them as is, and (if warranted) our conditions for resuming the work. Some 1’s, namely those that repeatedly break agreements, violate covenants (such as a professional code of conduct) or refuse to honor established ethical standards, established rules or regulatory requirements, can be dismissed or “ditched” without giving a reason.
Note: Once we are certain that the difficulty is not somehow our own lack of flexibility, or some other bias at the root of behaviors you or we happen to find intolerable (outside the scope of the aforementioned code of conduct, including basic honesty, etc.), we at In3 will then allocate at most 10-15 minutes per week per prospect to any 1’s. Again, it usually takes multiple interactions to determine if the communication challenges are just part of their learning curve or if there is a deeper issue, inadequacy, or disconnect. We will take initial responsibility, offering generous listening within a judgement-free “safe” zone, but then … they either demonstrate communication competence or they’re out. This means wishing them luck and announcing that In3 will need to sever ties. Some will burn this bridge (taking things personally) and get labeled “DNR” — Do Not Resuscitate. We will judge another person, but sometimes cannot work with their behavior, current level of skill, or lack of teamwork or lack of a point person.
On the other hand, In3 Affiliates and other service providers (finders, promoters, advisors) may occasionally recognize a “diamond in the rough” and want to bring forward that opportunity to get the attention and funding it deserves. That’s great. Just be sure to prepare per our requirements (venture capital under a Management Services Agreement following a RAIN assessment or project funding via CAP’s Six Essentials or loan programs) in order to get traction.
Conclusion: Unless others can help, or the prospect solves the underlying issue, Ditch these.
2. Repair: Unlikely client will perform, and/or the project itself is marginal or not viable for one or more reasons (e.g., unmitigated commercial risks, or not sufficient profit/ROI, or materials are substandard and client has no ability to make improvements but also cannot afford to hire someone to help). Recommendations:
- If not sufficiently profitable (under ~5% IRR for CAP, or below 10% for loan programs, or unsure of the profitability) – may be able to pivot the project plan or “enhance” this ROI with some effort/coaching from us. Make a judgement call.
- If too early stage – still in seed (idea) stage without a project plan or capabilities/resources to develop the proposal for funding, explain what is required (give samples/examples) and wait for the results.
- If the lead actually has no access to a capital guarantee nor any party that could “sponsor”, get creative. Problem-solve, if you see potential in the other key facets (project financial fundamentals and developer knows what he or she is doing, or is able to hire and/or involve advisors to compensate). First, follow In3 proven protocols to attract a backer/sponsor either as a vendor or other private party with inherent reasons in doing so. Sponsor motivation can be mission-related, charitable, or due to financial upsides of winning a contract to do the work, such as an EPC firm. Ensure that this opportunity to sponsor is pitched properly, which for some leads will mean they should hire you/us to do this for them.
Conclusion: Repair or Redirect. Explain what would bring the client’s project up to acceptable standards, and ask that they come back when they have achieved that (otherwise, after coaching, downgrade to a 1 and ignore).
3. Investigate and Interview to explore and clarify (adjust score up or down) as presently there is a modest chance of success, or too much uncertainty, because client’s project is either (any or all of these conditions may apply):
- Small budget – not much above ~$25 million (below $25m we just say no) – and/or uncertain deal terms (client does not want to sell any equity, for example)
- Uncertain business model or industry – project is not in any of the top 30 industry sectors, include fossil fuels, mining or other extractives, tobacco, pharma drugs, large hydro, conventional (chemical-based) agriculture, weapons, etc.
- Not new construction (a CAP funding requirement due to the monthly draw schedule), or a retrofit / refurbishment / upgrade, so unlikely our monthly draw schedule could work (ask if it does).
Recommendations: Investigate and explore/clarify the value of the project in relationship to its ability to qualify for funding. Interview the client and/or other experts in the sector. Adjust score (up or down) as more information arrives. Explain to client what would bring the project up to acceptable standards, and ask that they come back when they have achieved that (otherwise, lower the score after a reasonable period of time, or by default, and/or ignore).
Conclusion: Investigate to adjust up or down. 3’s are temporary. Keep digging.
4. Verify both virtues and issues, as 4’s have a decent Chance of success – a guarantor is in motion or known to be available, with workable deal terms, reasonable IRR and project risk/reward profile. Some issues or challenges to be addressed.
Recommendation: Verify to capture and highlight both strengths and any known/potential issues. If you lack the bandwidth or patience or technical/business background to help bring them to a 4.5 or 5 efficiently, consult with other Affiliates, but otherwise proceed to address those challenges in-house once there is a willingness and capability to facilitate a financial guarantee or the client is prepared to proceed with In3’s vetting work to pursue one or more loan programs (summarized comparison).
In3 services and resources to confirm a Feasibility score of 4 or higher:
- Is the project financing feasible? See Financeability Checklist
- 1-page overview of Loan Programs (not CAP) for sophisticated developers
- Venture finance feasibility (see also services offer)
Conclusion: Verify the 4’s.
5. Expedite these, as they have an excellent chance of success: These can be further subdivided as 5A, 5AA, 5B, etc., based on the other criteria.
Recommendation: Expedite and prioritize to focus your attention on these. Schedule time with the developers/owners so you don’t let those that score 4 or below distract or slow down rapid progress toward reaching financial closing with these projects, ordered in sequence of who performs as prodded along by our other criteria. Pre-qualify and (if subscribed) track via CRM registration or other systems as agreed to further sub-categorize who deserves to receive your and our undivided attention, resources and “quality time”.
Conclusion: Expedite and fund these!
Summary
- Ditch the 1’s
- Repair or Redirect the 2’s – Invite/Insist that 2’s Involve someone else from the client’s side (forming a coachable team), and/or adjust their plan fundamentals, to take next steps; otherwise ignore.
- Investigate the 3’s (interview, don’t interrogate) by asking questions to explore/clarify/adjust up or down, in or out. Involve others if the project developer is working in an industry or country/culture outside your expertise.
- Verify the 4’s – capture their virtues against any known/potential issues.
- Expedite (pre-qualify & fund) the 5’s.
To help remember these shortcuts: DRIVE