David Paul, CEO and a Managing Director of DWP Capital, has been active in growth equity and venture capital investing for more than 7 years–primarily in software and tech-enabled services. Before focusing his efforts solely into DWP Capital, Paul spent 5 years at the multi-family office Canal Partners, specializing in growth capital opportunities. He was one of the lead partners for seven investments and also served on the board of directors of 6 companies.
DWP Capital’s investments “look and smell a lot like venture capital, “but we're shooting for more capital efficient companies and have a little bit more modest return type of profiles. Companies with 3-5 backings, with a focus on niche vertical markets in healthcare, supply chain, aerospace, and food service.” said Paul.
Dealmakers can benefit from Paul’s years of experience in 2 ways: his podcast The Capital Stack and on his blog Ramblings by David Paul where he does not shy away from candidly sharing his insights. In December 2022, he shared the top 3 takeaways that confirmed DWP Capital’s need for outbound sourcing.
In 2023, all of DWP Capital’s Deals will be proprietarily sourced. This decision came after analyzing 500 deals in 2022. Here were the 3 key learnings Paul presented to his investors at their annual Limited Partners dinner.
“Grata changed the game.” According to Paul, “After DWP started using Grata, we knew we were going to be a completely outbound shop. We weren't going to work on relationships with other investors and or connectors. Frankly, I feel like the connectors, the lawyers and the bankers, have been calling it in for the last two years.”
“There are still good companies out there, but it's hard to find good companies because they're surrounded by mediocre companies. These companies wanted to be big businesses, but at the end of the day, their capabilities were bought in a really great environment and now the economy's contracting. Their novelty will wear off and there is going to be a churn tsunami,” said Paul.
The statement speaks for itself, but Paul added, “Anybody can write a check. Everyone wants to get that founder high. They want to work with founders and pretend like they're adding value. Where the rubber meets the road is sourcing. Nobody talks about sourcing and how important it is.”
Grata is a deal sourcing platform that helps you find, research, and engage with middle market companies, built for innovative dealmakers who want a competitive edge in finding previously undiscoverable companies.
Prior to Grata, Paul used a combination of LinkedIn and Crunchbase. With Grata, Paul quickly filters through millions of companies, finds relevant targets, and begins the process of separating great companies from the mediocre. Grata’s machine-learning, artificial-intelligence (ML/AI)-powered search engine pulls keywords directly from a company’s website, expanding Paul’s view of the market to include companies not currently looking to sell or attending conferences.
Not only did Grata speed up the qualifying process, Grata searches revealed higher quality companies and strengthened DWP’s pipeline.
“One of my learnings after looking at 500 deals was that DWP was good at building a really strong pipeline of sh*tty companies because we were just pulling lists from Crunchbase without any context or any nuanced information. With Grata, we’ve seen a significant increase in quality companies in our pipeline.”
“Summary View shows you the market landscape. It’s powerful because you can see who's putting money in who. You could wait for Pitchbook to put this information into a marketing piece or you can piece it together with your own lists in Grata.”
Using Summary View, Paul was able to look up “public safety software” companies and find that there's really only three buyers in that space.
Grata is the only platform that allows you to filter on software companies and “software-enabled” companies. There are companies whose business model may not fit neatly within “software” but have software components that could be a huge opportunity for investors.
“By definition, early stage growth equity is more price sensitive and so software companies and software-enabled companies are great businesses. You can go a lot further, become profitable much quicker with software-enabled companies. And bonus, you’re actually solving a real problem.”