Evaluating Investment Readiness

The 7Ps and one Z: a framework for evaluating investment readiness

When developing value propositions for early stage businesses, it is useful to have a framework to consider how potential investors will evaluate your teaser and info deck.

At Move78 we do this with our 7P1Z framework. Having worked with over 70 founding teams over the past 8 years we have supported teams that have raised over $125million USD.

"First you must have entrepreneurs who fully grasp their customers. The second thing is having an awesome value proposition"

— Craig Sherman

This framework is a distillation of the key questions that get asked and objections that are most commonly made:

• Problem - what problem are we solving, and is there money in it
• Positioning - what story are we telling, how clear and compelling is it
• Prospects - is there a large enough market size and how will the market grow
• People - who are the core team, do they have the right core skills and profile
• Product - where are we with the product/service.
• Propulsion - What traction and customers are we displaying
• Price - are the deal terms attractive
• Zeitgeist - how “now is it”?

Problem

Have you clearly articulated a significant problem that if it be solved, will unlock huge value for stakeholders in the business?

• A challenging and important problem
• Demonstrate that there are large numbers of people who would benefit from a solution
• Clear that solving the problem will create value for investors

Positioning

Are we telling a clear story? Does the overall flow make sense, and is it motivating and urgent to encourage action?

• The story is concrete, connected to reality and understandable
• The solution to the problem sounds feasible
• The challenge sounds impressive and inspiring
• We are answering the question “why now? With an urgent and action oriented pitch

Prospects

Are you entering a large enough market, that is growing rapidly, and capable of delivering venture-style returns?

• Large total addressable market (TAM)
• You have a realistic prospect to enter a market within the team’s core competency (Serviceable Addressable Market)
• You have a realistic subset of potential buyers to enable growth in the market you are approaching
• Market is overall growing rapidly

People

Do the team have the right skills, connections and experience to be successful?

• Founding team have right skills + experience
• Team has connections with the necessary industry players
• Advisors and existing investors

Product

A working product is better than a prototype, which is better than a demo, which is better than the idea

• A working product exists, that has ‘market fit’ with customers
• The product is growing in its usage
• The team has the ability to manage product journey, and can scale

Propulsion

What customer feedback do you have. Are you making money?

• Client / user satisfaction is high
• There is a strong growth rate in product sales
• The product is generating revenues
• The revenue is recurring with low marginal cost of sale

Price

How have you structured the fundraising round. Does the price match comparable deals at an equivalent stage?

• Does the deal match comparable other financings at similar stage
• Does the valuation reflect typical venture financing valuation models
• Use of funds is clear and focused on what money will be spent on, and what will be achieved

Zeitgeist

How does the proposition overall fit with what is in demand in the market at the moment

• People want to invest in areas that are predicted to grow rapidly
• That other investors will also be supporting

When we start developing an investor proposition with founders, looking through the lens of 7P1Z enables vision into what's useful and what is important.

Read the other articles in this series

• Investment readiness
• Preparing to raise
• Pitch development and storytelling
• Conducting a fundraising campaign (coming soon)