A Practical Diagnostic Used by Investors (Not Founders)
This diagnostic helps determine whether your business is actually ready for outside investment—or whether raising capital now would be premature, risky, or value-destructive.
Answer honestly. Investors will.
FUNDAMENTALS (The First 60 Seconds)
- Clear Problem & Customer
- Can you clearly state the problem in one sentence?
- Is there a defined, paying customer (not “everyone”)?
- Is the problem painful enough that customers actively seek solutions?
Red flag: “Nice to have” problems or vague customer definitions.
- Solution & Differentiation
- Is your solution meaningfully better—not just different?
- Can you explain why customers would switch or choose you?
- Is differentiation defensible (not easily copied)?
Red flag: Differentiation based only on features or pricing.
- Market Size Reality
- Is your addressable market realistically large enough for investors?
- Is TAM grounded in actual buyers, not top-down math?
- Does the market support venture-scale or private growth returns?
Red flag: Inflated TAM with no bottom-up validation.
TRACTION & PROOF (Credibility Test)
- Revenue or Validation
- Do you have revenue, pilots, LOIs, or signed contracts?
- If pre-revenue, do you have credible proof of demand?
- Can traction be verified?
Red flag: “We’ll monetize later.”
- Customer Acquisition Logic
- Do you know how customers are acquired?
- Are CAC assumptions realistic and tested?
- Can growth scale without exploding costs?
Red flag: “Organic growth” with no defined engine.
- Retention & Repeatability
- Do customers stay, renew, or buy again?
- Is churn understood and measured?
- Is there a repeatable sales or onboarding process?
Red flag: One-off wins mistaken for traction.
FINANCIAL READINESS (Where Most Fail)
- Financial Model Integrity
- Are projections tied to real operating assumptions?
- Does headcount support growth claims?
- Are margins realistic for the industry?
Red flag: Financials that grow without operational explanation.
- Capital Ask Logic
- Is the amount being raised tied to clear milestones?
- Do you know what this round must accomplish?
- Is capital sufficient but not excessive?
Red flag: Raising “as much as possible” without a plan.
- Unit Economics
- Do you understand contribution margins?
- Is there a path to profitability (even if long-term)?
- Can scaling improve economics?
Red flag: Growth that worsens losses.
TEAM & EXECUTION (Investor Confidence)
- Founder-Market Fit
- Does the team have credibility in this market?
- Are gaps acknowledged and planned for?
- Is leadership coachable and realistic?
Red flag: Overconfidence or denial of weaknesses.
- Execution Capability
- Can this team deliver on the next 12–24 months?
- Are roles clearly defined?
- Is decision-making structured?
Red flag: Vision without execution discipline.
RISK & DILIGENCE (Silent Killers)
- Risk Awareness
- Have key risks been identified openly?
- Are mitigation strategies credible?
- Does the plan acknowledge what could go wrong?
Red flag: Plans that pretend risk doesn’t exist.
- Legal & Structural Readiness
- Clean cap table?
- IP ownership clear?
- No unresolved founder or equity disputes?
Red flag: Cap table or IP issues discovered late.
- Alignment Across Materials
- Pitch deck, plan, and financials tell the same story?
- Assumptions are consistent?
- Narrative matches numbers?
Red flag: Internal contradictions.
INVESTOR FIT (Often Overlooked)
- Right Investor, Right Time
- Does this opportunity match the investor’s mandate?
- Stage, check size, and timeline aligned?
- Clear reason why now?
Red flag: Pitching everyone.
SCORING YOUR READINESS
- 13–15 Yes:
Investor-Ready
You’re positioned for serious conversations and diligence. - 9–12 Yes:
Borderline
Strategy and structure likely need refinement before raising. - Below 9 Yes:
Not Investor-Ready
Raising now may lead to rejection, dilution, or stalled deals.
What This Diagnostic Does Not Do
This diagnostic:
- Does not guarantee funding
- Does not replace investor judgment
- Is not investment advice
It reflects how experienced investors screen risk and readiness.
Why This Matters
Most founders ask:
“Can I raise money?”
Investors ask:
“Should I invest?”
Being investor-ready means answering their question—clearly, credibly, and defensibly.
