Stage 2: The Business & GTM Deep Dive

After successfully passing the Founder & Vision Interview, we move to Stage 2 of our diligence process: a comprehensive business model and go-to-market deep dive. This stage is led by our GTM Partner and focuses on pressure-testing the business model, unit economics, and path to revenue.

Our Approach

This stage is designed to validate the commercial viability of the opportunity and ensure there’s a clear, executable path to sustainable revenue growth. We analyze the business through both quantitative and qualitative lenses to understand the true potential and challenges.

Business Model Assessment

Revenue Model Validation

Revenue Streams: Clear identification and validation of all revenue sources
Pricing Strategy: Analysis of pricing model, competitive positioning, and customer willingness to pay
Unit Economics: Deep dive into customer acquisition cost (CAC), lifetime value (LTV), and contribution margins
Scalability: Assessment of how the business model scales with growth

Business Model Maturity

This is a crucial evaluation criteria. We assess whether the business model requires:

Patch: Minor adjustments like pricing tweaks or new channels
Complete Restructure: Fundamental changes to the business model (major red flag)

A complete restructure indicates significant uncertainty and risk to our timeline and resources.

Market Validation & Traction

Customer Validation: Evidence of real customer demand and market need
Early Traction: Analysis of current traction metrics and growth patterns
Market Feedback: Review of customer feedback and market response
Competitive Positioning: Assessment of competitive advantages and market positioning

Go-to-Market Strategy Deep Dive

Distribution Engine Analysis

This is crucial for our evaluation. We assess whether the founder has a credible distribution plan:

Founder-Led Growth Path

Personal Brand: Does the founder have a powerful personal brand or audience?
Execution Willingness: Are they willing to execute a founder-led growth strategy?
Content Strategy: Can they leverage their expertise and audience for customer acquisition?
Network Effects: Can they tap into their professional network for early customers?

Paid Growth Path

Budget Availability: Do they have or can they access a credible customer acquisition budget?
Channel Strategy: Have they identified viable paid acquisition channels?
Performance Metrics: Do they understand the key metrics for paid acquisition?
Scaling Plan: Is there a clear plan for scaling paid acquisition efforts?

A lack of either founder-led growth capability or paid growth budget is a major red flag.

Customer Acquisition Strategy

Target Customer Profile: Clear definition of ideal customer profile (ICP)
Customer Acquisition Channels: Identification of primary and secondary acquisition channels
Sales Process: Understanding of the sales funnel and conversion optimization
Customer Retention: Strategy for customer retention and expansion revenue

Market Entry Strategy

Beachhead Market: Clear identification of initial target market segment
Market Timing: Assessment of market timing and competitive dynamics
Barriers to Entry: Analysis of barriers to entry and competitive moats
Expansion Strategy: Plan for market expansion and geographic growth

Financial Analysis

Financial Planning & Projections

Revenue Projections: Realistic revenue forecasts based on market analysis
Cost Structure: Understanding of fixed and variable costs
Funding Requirements: Clear understanding of capital needs and use of funds
Path to Profitability: Timeline and strategy for achieving profitability

Unit Economics Deep Dive

Customer Acquisition Cost (CAC): Analysis of CAC across different channels
Lifetime Value (LTV): Calculation of customer lifetime value and retention metrics
LTV/CAC Ratio: Assessment of unit economics health and sustainability
Payback Period: Understanding of customer acquisition payback period

Idea Validation Assessment

Problem-Solution Fit

Problem Validation: Evidence that the core problem has been validated with real users
Solution Validation: Proof that the proposed solution addresses the validated problem
Market Feedback: Analysis of market feedback and customer validation
Iteration History: Review of how the idea has evolved based on market feedback

Future Development

Product Roadmap: Assessment of future product development plans
Market-Driven Development: Are future ideas based on market feedback or speculation?
Resource Allocation: Understanding of how resources will be allocated for development
Risk Assessment: Identification of key risks and mitigation strategies

Success Criteria

To advance to Stage 3, founders must demonstrate:

Solid Business Model: A mature business model requiring minimal restructuring
Validated Market Demand: Clear evidence of market validation and customer demand
Credible Distribution Plan: Either founder-led growth capability or paid growth budget
Strong Unit Economics: Healthy LTV/CAC ratio and clear path to profitability
Realistic Projections: Well-founded financial projections and growth assumptions

Red Flags

Critical concerns that may disqualify an opportunity:

Business Model Uncertainty: Need for complete business model restructure
Lack of Distribution: No credible plan for customer acquisition
Poor Unit Economics: Unsustainable CAC/LTV ratios or unclear path to profitability
Unrealistic Projections: Growth assumptions not grounded in market reality
Limited Market Validation: Insufficient evidence of real customer demand

Next Steps

Founders who successfully complete the Business & GTM Deep Dive advance to Stage 3: The Product & Tech Deep Dive, where our Technical Partner evaluates the product and technology foundation.

This is part 2 of our 3-part Diligence Process series. Read about The Founder & Vision Interview and continue to The Product & Tech Deep Dive to understand the complete journey.