How Founders Can Architect a Vision That Secures Investment

We often refer to founders as 'builders'. They are building a product, a solution, a team, a company. But successful founders are more than builders, they are also 'architects'. They architect a vision of the future that others can't yet see.

Realising that vision in practical terms often seems impossibly hard at the outset. When the early part of the startup journey requires so much experimentation and when so many big decisions are still in flux, it's hard to imagine what the final shape of the company - and the new category it creates - will be.

So the architecture can only be a set of loose constructs that must develop and strengthen over time. But if these constructs could be combined into a simple framework upon which the startup is gradually fleshed out then we might have a tool that founders can use to plan the journey to becoming a scale-up.

At Duet, we have created such a framework to help founders architect their plans, linking them to the big funding milestones. It brings order to the journey by anchoring the vision in place from day 1 using a simple, high-level description from which everything else flows.

We use the 'Investment Analysis Framework' on a daily basis across the different aspects of our advisory business, from founder coaching to fundraising campaign preparation.

The framework is a tool that can also be applied across a variety of other use cases, for example:

• Pre-investment planning
• Post-investment planning
• Undertaking a pivot

Here we provide an overview of this tool and show how it can be applied to investment planning. We hope that this might provide some useful insights for founders as they navigate the funding journey.

Investment Analysis Framework

The framework constitutes a 'foundation' and a set of 4 'pillars' that together support the vision - much like a building supports a roof.

The foundational element is the 'Problem/Solution Thesis' and the 4 supporting pillars are:

• Product/Market Fit
• Go-to-Market Strategy
• Business Model
• Team

Each pillar will seem like an obvious component in its own right. But the key insight is how the 4 pillars rely on the continuity and resilience of the underlying Problem/Solution Thesis, as the company progresses from startup to scaleup.

We use the framework as a navigation aid though each stage of company development and funding. It reminds us of the key questions that investors will ask (and founders should ask themselves) along the way. It also provides a checklist for the evidence required at each funding milestone.

For example, for a B2B SaaS company at Pre-Seed the emphasis is on the Problem/Solution Thesis and the Team. At Seed, the emphasis will shift to Product/Market Fit. At Series A, Product/Market Fit will have been secured so the emphasis moves to Go-to-Market momentum in the initial (beachhead) market. At Series B the Go-to-Market flywheel is working and emphasis shifts to how the Business Model is delivering strong unit economics.

Sector variances. The importance and maturity of each element is also dependent on the sector. For example, a Seed stage B2B SaaS startup will have very different characteristics to a Seed stage DeepTech company.

The foundation: Problem/Solution Thesis

Is there potential to create a valuable business?

The Problem/Solution Thesis underpins everything. It is the premise upon which the entire startup is built. As the startup finds product/market fit and begins early scaling, it should be firmly locked down.

The thesis claims that there is potential to build a valuable business. i.e. there is a big problem to solve or a big, high growth, market opportunity to exploit. It argues that based on the founder's special insight, a solution can de developed that creates unique market positioning. In doing so it marginalises any potential competition. In some cases it claims that a whole new market category can be formed.

If the first phase of growth in the initial market remains elusive, the Problem/Solution Thesis may need to fundamentally change. For example, a technology innovation aimed at the Defence sector is not gaining traction so it is redirected at the Consumer sector. This is a pivot, even if the tech remains the same.

Pivots are costly as changing the foundations requires changing everything else that is built on top. The earlier you realise the Problem/Solution Thesis is either wrong or needs major adjustment, the better!

As the company grows it may address new geographies and develop additional products. At each of these decision points the foundations must be examined: Does the original Problem/Solution Thesis still remain intact? Or does a new (additional) Problem/Solution thesis need to be developed? This is a natural process of growth but only once the company is established.

Pillar 1: Product/Market fit

Are we engaging with supportive customers who love our product?

This pillar recognises that Product/Market Fit (PMF) is a journey. One of the great misconceptions is that it represents a specific moment, a sudden inflection point when all the stars seem to align as customer demand takes off and keeps going. It's rarely like this.

In our earlier piece, 'When early growth becomes a deadly illusion', we said: "But reaching PMF with early adopters is rarely the same as reaching PMF with the mainstream market. Startups often have to find PMF multiple times as the company grows; as they target new types of customer, fend off competition, and extend the product offering. PMF is rarely a static position."

What we were alluding to was a 'non-binary' view of PMF. In fact,the degree of PMF evolves as the company progresses, even before real growth starts to take hold.

For example, in DeepTech companies, we align PMF with the Technology Adoption Curve. As there are 4 stages of progression on the curve - before the market matures and ultimately declines - there are 4 associated degrees of product/market fit. For a deeper dive on these see our related article.

Pillar 2: Go-to-Market

Do we have the capability to efficiently scale?

This pillar recognises that the capability to scale requires the combination of skills and initiatives. The skills aspect is covered under Team. Different types of initiative will be required at each stage. Some initiatives will only require internal resources, but others will require external resources, such as channel partners and supply chain partners.

In some sectors, such as B2B SaaS, the classic go-to-market (GTM) strategies and the metrics that measure their progress are generally well known. But in DeepTech, the GTM strategy can often be highly innovative itself, and may involve a multitude of parties in a complex food chain. The capability to manage multiple parties in the early stages (whose attention may easily drift elsewhere) is often underestimated. Investors will drill deeply into this subject during due diligence.

Pillar 3: Business Model

Can we make money?

This pillar recognises that business model must draw every aspect of the business together to create a money-making machine (described in finer detail in our earlier piece on the Business Model Canvas). It then zeros in on the cost structure and revenue streams and how these are then captured in a financial model that investors will be able to understand.

Even though the true economics of the business rarely emerge until the early stages of growth, founders must believe from the outset that they are building a money-making machine. The bold assumptions they make (that are embedded in the very earliest financial model) are crucial in convincing investors that big returns are possible.

Pillar 4: Team

Do we have the capability to search for then execute the business model?

This pillar recognises that in high growth startups, assembling the right people with the right skills and then leading them forward is often the single biggest challenge a founder faces. The pure scale of the task (e.g. hiring 50 AI developers in less than a year as one of our clients is doing) sometimes demands building dedicated hiring functions and undertaking international recruitment from the very earliest stages.

Even though the tech talent pool in Europe is growing at a 24% compound annual growth rate, we are currently witnessing a net talent migration to the US. In fact, European founders are now behind about 10% of US startups, leading to around 800 companies being founded in the US instead of Europe each year. These huge challenges sit right in the critical growth path and are currently foremost in investor minds.

Using the Framework

There are 2 primary use cases for the framework. The most obvious is pre-investment planning and the less obvious is post-investment planning.

Let's consider these in the context of the Seed to Series A transition.

The Seed to A transition is brutally hard. It is where the greatest number of startups fail. Research has shown that only 14% of European startup companies graduate from Seed to Series A and continue on a funded growth path.

Startups here are crossing the chasm, from the 'early adopters' to the 'early majority'. They must quickly find and secure the beachhead market, providing the potential for sustained growth.

But the beachhead is often elusive. The 2 common problems being:

• the inability to find strong PMF (the mainstream market won't engage), or
• strong PMF can be found but the market isn't big enough or accessible enough to enable the company to make money and grow.

Given these circumstances, investors are particularly sensitive about the risk of failure as the startup traverses the chasm.

Use case 1: Pre-investment planning (Seed round)

Founders must predict and proactively address all the early risks so they can build a compelling investment proposition at Seed.

During the planning cycle, the framework is used to help founders undertake a gap analysis - 'where we are now' versus 'where we need to be' at campaign start. Founders complete a scorecard that rates their state of readiness for each of the 5 elements - the foundation plus the 4 pillars.

The big focus is on the Problem/Solution Thesis, the Team and the plan to reach PMF.
Founders then see where the big gaps exist and can set their priorities accordingly. The aim is to be as investment ready as possible when it's time to launch the funding campaign.

Use case 2: Post-investment planning (pathway to Series A)

In the aftermath of the Seed round, we repeat the cycle but this time the gap analysis focuses on the Series A round, which is a huge step up.

As the startup crosses the chasm it often encounters some of the most serious challenges. The vast majority don't make it, many underestimating how little time they have to accumulate the critical evidence.

In the case where the Seed round has bought say 20 months of runway, and assuming it takes 10 months to raise the Series A (1-2 months to prepare materials etc. plus 8-9 months from first pitch to money in the bank) the company will have around 10 months to demonstrate solid progress. i.e. Deliver the critical evidence needed for Series A investors.

The priorities for the next 10 months can now be set in the knowledge that if they are delivered the company should be Series A investment ready when the campaign begins.

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