TEN13 is a Brisbane-based Australian venture capital syndicate founded in 2019 by Stew Glynn and Steve Baxter. This article is the transcript and companion reference for Flight Club #4 - Due Diligence and the Pre-Flight Checklist, the fourth session in TEN13's investor education series. It covers why due diligence matters, TEN13's own commercial and legal due diligence framework, how the process changes at each funding stage, and the red flags that most often kill a deal.
Why Due Diligence Matters
TEN13 invests first cheques of A$300,000 to A$2 million at pre-seed and seed stage in technology companies across Australia, New Zealand and globally, backed by a network of 500+ sophisticated investors. Before any of that capital moves, every prospective deal passes through TEN13's due diligence process.
As Managing Partner and Co-Founder Stew Glynn opened the session: whenever he gets off a call with a founder, he's genuinely excited - founders building ambitious businesses create real optimism. But that excitement has to be tested. Due diligence is the last line of defence between initial enthusiasm and an actual investment decision, and it's the process TEN13 uses to work out whether a founder has a realistic plan to execute and generate an investment return.
Good due diligence doesn't just prevent bad investments. It also gives you conviction in the right ones. - Chris Dixon, Co-founder, a16z
TEN13's Commercial Due Diligence Framework: The 6 Ts
TEN13 structures its commercial due diligence around six factors the team calls "the 6 Ts." If a company gets a green light on these commercial factors, TEN13 then moves into legal and financial due diligence.
| Factor | What it tests |
|---|---|
| Team | Are the founders the right people to solve this problem? |
| TAM | Is the addressable market large enough for an outlier outcome? |
| Technology | Is the product differentiated, defensible and solving a real problem? |
| Traction | Is there evidence of revenue, usage, retention or customer love? |
| Timing | Why is now the right time for this problem to be solved? |
| Terms | What's the deal structure, valuation and investor protection? |
Beneath the 6 Ts sits a second, more granular layer: legal due diligence (contracts, IP, protections, disputes) and financial due diligence (making sure a company's financials are accurately conveyed). Both are covered in detail below.
How Due Diligence Focus Shifts by Funding Stage
TEN13 typically enters at pre-seed through seed, but applies a different due diligence lens depending on how mature a company is.
| Stage | Due diligence focus |
|---|---|
| Pre-Seed & Seed | Founder quality, ambition and track record; market competition, sizing and timing; early signs of customer love (revenue, usage, growth or retention); vision and roadmap, including how and why founders think about building, not just what they will build. |
| Series A | Founder quality; hiring plan; product roadmap; traction, including growth, unit economics and early customer acquisition cost; projections, and understanding what new products, geographies or channels will grow revenue into the next stage. |
| Series B+ | Deep focus on financials and quality of revenue (customer concentration, growth, churn, retention); strong focus on unit economics and profitability; go-to-market and competitive strategy; less relative focus on the founder, given they have already proven themselves to reach this stage. |
Due Diligence Starts at the First Interaction
Due diligence on a founder doesn't start when a term sheet is drafted - it starts the moment a relationship begins, sometimes years before an investment is made. Manager of Investor Relations Brendan Hill noted that the relationship between an early-stage investor and a founder can last eight to ten years, longer than the average American marriage, which is why TEN13 prioritises meeting founders early and nurturing that relationship over time.
Marc Hermann, Everlab
Marc Hermann first messaged Brendan Hill on LinkedIn after moving to Australia from Berlin, where he had previously scaled a startup to more than $100 million in revenue and exited it. TEN13 got to know him over several years, including informally, before he founded Everlab and ultimately brought the opportunity to TEN13.
Liam Millward, Instant
Liam Millward first contacted TEN13 by cold email at 16 years old, while running an ecommerce store generating roughly $10,000 a month in sales. He went on to interview 77 different CTOs while building out his advisory team, and TEN13 invested when he was 17, with his mother acting as company director until he turned 18. Instant is a checkout technology company designed to compete with international players like Bolt.
Not every founder fits a textbook profile
Great founders come from very different backgrounds, but tend to share the same grit, determination and ability to execute.
| Founder | Company | Background |
|---|---|---|
| Marc Hermann | Everlab | Multi-time founder; scaled and exited a previous startup to more than $100m in revenue; MBA. |
| Karen Nelson Field | Amplified Intelligence | PhD in Media; industry pioneer in the "attention" field of research; first-time founder. |
| Liam Millward | Instant | Founded a digital travel magazine with 50,000 readers at age 14; ran an ecommerce store at $10k MRR; founded Instant at 16; no university or corporate experience. |
Traction: What TEN13 Looks For
TEN13 treats traction as one of the most important signals in commercial due diligence, but is explicit that traction doesn't have to mean revenue.
Traction trumps opinion. An idea that looks unappealing on paper is still worth digging into if there is proof that people are paying for it, or a strong signal that they will. TEN13 is willing to invest in pre-revenue companies, provided there is evidence such as high usage, a growing waitlist or strong product reviews pointing to future propensity to pay.
- Revenue traction is usually a recurring contract (SaaS) or a share of transactional volume (fintech, marketplaces), ideally growing above 60% year-on-year at pre-Series A to reach typical venture velocity.
- Non-revenue traction includes customer love, usage, retention and waitlist growth.
- TEN13 talks directly to customers to understand why they use a product and how they feel about it.
Analysing revenue goes beyond ARR
Quality of revenue matters as much as quantity. TEN13's financial due diligence on revenue covers four areas:
| Category | What TEN13 reviews |
|---|---|
| Revenue | Growth rates, customer concentration, cash flow and working capital |
| Usage | Daily active users, weekly active users, user ratios, virality coefficient |
| Retention | Churn, net revenue retention, logo retention |
| Profitability | Burn, gross and net margin, EBITDA margin, acquisition costs, Rule of 40 |
Sizing the Market: TAM, SAM and SOM
TEN13 assesses whether a market is large enough to support the outcome the fund is targeting - generally a 20x-plus return, or the equivalent of a company reaching $100 million in revenue. That assessment sits across three nested layers: Total Addressable Market, Serviceable Addressable Market and Serviceable Obtainable Market.
- Competition and market structure - who else operates in the space, how well funded and progressed they are, which markets they're active in, and whether any incumbent already holds large, sticky market share.
- Product differentiation - product quality, stickiness, defensibility and moat, and whether built-in growth mechanisms like network effects or product-led growth exist.
Because TEN13 invests in Australian founders building for global markets, the team spends significant time understanding founders' plans to launch in new geographies, not just desktop-research market sizing.
Timing: Why Now?
TEN13 looks for regulatory, technological or social shifts that let a company ride a growing wave rather than fight an established one. Three historical "why now" tailwinds:
| Company | Tailwind |
|---|---|
| Uber | Enabled by widespread smartphone adoption with data and GPS |
| DraftKings | Enabled by increasing legalisation of online sports betting in the US |
| Robinhood | Enabled by the SEC's adoption of fractional share trading |
TEN13's team believes AI is the current version of that tailwind: frontier models are letting founders build new companies faster into markets with comparatively low competition, similar in scale to the internet in the 2000s and smartphones from 2008 onward.
The Value of TEN13's 500+ Investor Network
TEN13's differentiated asset in due diligence is its investor network. The syndicate's 500+ investors are founders, operators and executives from companies including Google, Stripe, Plaid, Afterpay, Uber, Canva, Atlassian, McKinsey & Company, Facebook, Amazon, Seek, Macquarie, UBS, EY and Credit Suisse, among others. TEN13 uses this network to supercharge sourcing, due diligence and portfolio support, tapping what the team describes as the deepest pool of individual sector expertise in Australia.
In practice, this means TEN13's deal team can call a specific network member with direct experience in a target industry - whether that's manufacturing software, ad tech or a specific geography - to fact-check assumptions and get an insider's read on competitive dynamics.
Why an Institutional Process Goes Further Than an Individual Angel Can
Investing through a formal Australian venture capital syndicate like TEN13 gives investors access to a more rigorous due diligence process than most individual angels can run on their own:
- More resources and staff hours dedicated to the process.
- More comprehensive access to financial and legal information - companies are often reluctant to share a full cap table with a smaller individual investor.
- Complete coverage of cap table and funding history.
- Access to paid market research software that is cost-prohibitive for an individual angel.
- Access to a broader network of industry experts.
- Institutional experience recognising common red flags and pitfalls.
Legal Due Diligence
Great deals can and do fall over at the legal due diligence stage. This is where TEN13 works through the operational and structural details of a company to confirm it is investable.
| Item | What's checked |
|---|---|
| Company structure | TEN13 typically wants to invest into an Australian private company limited by shares; unconventional structures are usually treated as an amber flag |
| IP assignment | Confirming intellectual property developed before incorporation has been properly assigned to the company |
| Employment agreements | Confirming founder and employee duties are properly documented |
| Founder loans and other liabilities | Checking whether founder loans have been converted to equity or forgiven, and reviewing any other outstanding debt |
| Key contracts | Customer, partner, distribution and IP-provider agreements, checked for clauses that could let a third party gain hold of valuable IP |
| Legal disputes | Reviewed and, where relevant, deeds of settlement and release obtained |
| Technology ownership | Clear ownership of technology used and any reliance on third-party technology |
| Regulatory and compliance | Relevant approvals, particularly important for regulated sectors such as fintech |
Financial Due Diligence: Getting Forensic
TEN13's financial due diligence goes beyond the headline numbers a founder presents. Common themes the team reviews that can degrade a company's outlook:
- Quality of revenue - distinguishing genuinely recurring revenue from transactional or consulting-style revenue mislabelled as annualised recurring revenue.
- Working capital and cash flow cycles - particularly for companies that need to front working capital for equipment or inventory.
- Quality of the balance sheet - unexpected liabilities or unresolved founder loans.
- Accounting method - whether a company is using cash or accrual accounting, which is often unclear at early-stage startups without an in-house accounting function.
TEN13's scale gives the team access to source systems like Stripe and Xero directly, something that is typically difficult for an individual angel investor to obtain.
Red Flags and Pitfalls
Drawing on years of due diligence across TEN13's Australian venture capital portfolio, the team outlined the five most common red flags that can kill a deal.
| # | Red flag |
|---|---|
| 1 | Cap table problems - founders too heavily diluted, creating misalignment and insufficient incentive to keep executing. |
| 2 | Problematic or risky corporate domicile - an entity structure that may require a costly "flip up" or redomicile before it's investable. |
| 3 | Actual financial performance not aligning with the pitch - numbers presented to investors that don't match underlying financials. |
| 4 | Adverse founder references or history - including one case where a developer's undisclosed criminal history later resulted in a company's codebase being held ransom. |
| 5 | General non-disclosure of material items - including one case where a company planned to use investor funds to buy out existing shareholders without disclosing that intention; TEN13 declined the deal, and the company later went bankrupt. |
Following Versus Leading a Deal
Due diligence depth changes when TEN13 leads a round versus when it follows another lead investor. When following, TEN13 generally requests access to the same data room provided to the lead investor to ensure it receives full disclosure. However, TEN13 typically relies more heavily on the lead investor to negotiate legal protections and structure the long-form investment documents, since too many parties driving legal terms independently makes a deal difficult to close.
For follow-on investment rounds into existing portfolio companies, TEN13's due diligence is lighter touch in some respects - company structure and core legal protections are already understood - but the team still builds a fresh investment case and takes it back to the investment committee for every round, including the option to decline to participate if a company hasn't hit its milestones.
Inside TEN13's Investment Committee
TEN13's investment committee meets formally every fortnight to discuss opportunities moving through the pipeline. A company is typically discussed at investment committee three or more times before a final decision is made. TEN13 requires a unanimous vote from its three core investment committee members - Stew Glynn, An Vo and Steve Baxter. If the committee cannot reach unanimous agreement, the deal does not proceed unless the team can resolve the specific areas of concern and return with a plan that satisfies all three members.
Key Person Risk
Given how heavily early-stage investing relies on founders, TEN13 addresses key person risk directly, noting that companies more often fail from internal issues than external competition. TEN13 manages this risk partly through founder vesting: shares earned over a set period, commonly four years, so that if a founder leaves early, unvested shares are returned to the company at nominal value and can be used to incentivise a replacement, protecting both investors and the company from "dead equity."
Due Diligence Abroad
TEN13 doesn't always know every founder personally before investing, particularly for opportunities outside Australia. Instead, the team cross-references founders through its global network, with TEN13 team members regularly travelling to meet founders and investors in person - including trips to India, San Francisco, Singapore and Africa - to build direct, on-the-ground relationships with the broader venture ecosystem.
Who Presented This Session
Collectively, the TEN13 investment team brings 30+ years of combined venture capital investing experience, has deployed $120m+ in funds under management, has backed 100+ companies, and holds 8 board positions across the portfolio.
Frequently Asked Questions About Due Diligence
What framework does TEN13 use for commercial due diligence?
TEN13 uses a "6 Ts" framework covering Team, TAM (market), Technology, Traction, Timing and Terms, before moving into a second layer of legal and financial due diligence.
Does a startup need revenue for TEN13 to invest?
No. TEN13 invests in pre-revenue companies where there is strong evidence of customer love, such as high usage, retention, a growing waitlist or strong product reviews, though the team generally wants to see some signal that customers will eventually pay.
What are the most common reasons a deal falls over during due diligence at TEN13?
The most common red flags are cap table problems that leave founders under-incentivised, risky corporate domiciles that require a costly restructure, financial performance that doesn't match the pitch, adverse founder history, and non-disclosure of material information.
How is due diligence different when TEN13 follows a lead investor versus leads a round itself?
When following, TEN13 requests the same data room as the lead investor to ensure full disclosure, but generally relies on the lead investor to negotiate legal protections and structure the long-form investment documents.
How does TEN13's investment committee make decisions?
TEN13's investment committee meets every fortnight and requires a unanimous vote from its three core members - Stew Glynn, An Vo and Steve Baxter - before an investment proceeds.
What percentage of companies TEN13 reviews go on to receive an investment?
TEN13's team estimates it meets more than 100 companies a month and typically invests in only one or two of them, meaning the large majority of companies reviewed fall over during the due diligence process.
What is TEN13, and where is it based?
TEN13 is a Brisbane-based Australian venture capital syndicate founded in 2019 by Stew Glynn and Steve Baxter. Its deal-by-deal model lets a network of 500+ sophisticated investors co-invest in individual funding rounds from a A$10,000 minimum, alongside TEN13's own first cheques of A$300,000-A$2 million into pre-seed and seed technology companies.