Raising $10 million or more changes the nature of investor diligence.
At this level, investors are less concerned with the headline story and more focused on:
- Whether your financials can withstand scrutiny
- Whether your metrics and unit economics are reliable
- Whether you have the discipline to deploy a larger amount of capital
When those elements are weak or inconsistent, diligence slows down, questions multiply, and confidence erodes—even if the underlying business is strong.
This article outlines where investor readiness typically breaks down in $10M+ rounds and what founders can put in place to reduce friction, maintain credibility, and keep diligence focused on the substance of the business rather than on basic data quality.
What Investor Readiness Means at the $10M+ Level
For a $10M+ raise, investors are effectively underwriting four things:
- The integrity of your financial statements
- The quality of your metrics and unit economics
- The realism of your capital deployment plan
- The baseline governance and control environment
Being investor‑ready does not mean having perfect systems. It means investors can:
- Follow your numbers from source systems to financial statements
- Understand how growth translates into contribution margin and cash
- See how $10M+ will be used and what it is expected to produce
- Trust that you have enough control and oversight to manage the capital
Common Readiness Gaps for $10M+ Rounds
The issues below are typical when companies move from earlier raises to a $10M+ process.
1. Financial Statements Not Decision‑Ready
What it looks like
- Revenue and costs are not segmented in a way that reflects how the business operates.
- Revenue recognition, discounts, and refunds are handled inconsistently.
- Cash flow statements are missing, incomplete, or not reconciled.
Why it slows diligence
- Investors and their advisors need to adjust or rebuild the financials.
- Additional explanations and reconciliations are requested repeatedly.
- Confidence in reported revenue, margins, and cash flows declines.
What prepared companies have
- Monthly accrual‑based P&L, balance sheet, and cash flow statements for several years (or since inception).
- A consistent chart of accounts and documented accounting policies.
- Financial statements reconciled to bank accounts and core systems.
2. Metrics Misaligned with the Business Model
What it looks like
- Emphasis on broad metrics (for example, users, downloads, traffic) without linking them to revenue and unit economics.
- Definitions of ARR, churn, LTV, or payback that change over time or differ across decks and models.
- Limited or no cohort analysis by acquisition channel, product, or segment.
Why it slows diligence
- Investors cannot easily assess growth quality, retention, or payback.
- Time is spent clarifying metric definitions instead of analyzing performance.
- Comparisons to other portfolio companies become difficult.
What prepared companies have
- A concise set of metrics that fit the model (for example, ARR, net dollar retention, LTV/CAC, contribution margin, payback period).
- A metrics dictionary and reconciliations from metrics back to the P&L.
- Cohort views by channel or segment that show how customers behave over time.
3. Forecasts Not Tied to Operating Drivers
What it looks like
- Forecasts that assume a simple growth percentage without underlying detail.
- Financial models that exist but are not connected to hiring, sales capacity, or product roadmap.
- No sensitivity analysis around growth, churn, or timing.
Why it slows diligence
- Investors question whether the forecast is achievable or internally used.
- They need to build their own scenarios to understand downside risk.
- The link between the requested capital and the outcomes it is expected to fund is unclear.
What prepared companies have
- A driver‑based model that ties revenue to sales capacity, conversion, pricing, and customer behavior.
- Expense plans aligned with planned revenue, hiring, and initiatives.
- Scenarios that show how changes in key assumptions affect cash and runway.
4. Fragmented Data Room and Documentation
What it looks like
- Missing or outdated financial, customer, or contract documents.
- Multiple “final” versions of cap tables, board decks, or key agreements.
- Inconsistent folder structure and naming, making navigation difficult.
Why it slows diligence
- Investors spend time locating and reconciling documents instead of analyzing them.
- Questions arise about which version is current and accurate.
- The overall control environment appears weaker than it may be in practice.
What prepared companies have
- A structured data room with clearly labeled folders (corporate, financial, commercial, legal, HR).
- One current version of each core document, with consistent naming conventions.
- A basic index of what is available and how it is organized.
5. Limited Governance and Internal Controls
What it looks like
- No regular board or advisory meetings with documented decisions.
- Single‑person control over key financial processes (approvals, payments, reconciliations).
- Informal or undocumented approval thresholds for major contracts and expenditures.
Why it slows diligence
- Investors question how larger amounts of capital will be overseen.
- Concerns arise about fraud risk, error risk, and reporting quality.
- Additional covenants, reporting requirements, or post‑closing conditions may be requested.
What prepared companies have
- A basic governance structure (board or advisory group) with regular, documented meetings.
- Defined approval thresholds and some separation of duties where practical.
- A regular internal reporting cadence to leadership and the board.
Investor Readiness in Five Decision‑Critical Areas
The following framework organizes investor readiness into five areas that tend to matter most during $10M+ diligence. It consolidates the earlier themes and focuses on expectations and red flags.
1. Financial Statements and Reporting
Expectations
- Historical monthly P&L, balance sheet, and cash flow statements, accrual‑based and reconciled.
- Revenue, direct costs, and operating expenses segmented in a way that reflects how the business is run.
- Clear treatment of revenue recognition, discounts, refunds, and non‑recurring items.
Red flags
- Large, unexplained adjustments during diligence.
- Inability to tie reported revenue and margins back to underlying systems and contracts.
- Volatile gross margins or expense lines without clear explanations.
2. Metrics, Cohorts, and Unit Economics
Expectations
- A small set of clearly defined metrics aligned with the business model.
- Cohort and channel views that connect acquisition, retention, and economics.
- Direct links from metrics (such as ARR or contribution margin) to financial statements.
Red flags
- Metrics that change definitions mid‑process.
- Difficulty producing cohort or channel views when requested.
- Significant discrepancies between platform‑reported metrics and accounting records.
3. Financial Plan and Capital Deployment
Expectations
- A 24–36 month forecast that ties revenue to identifiable drivers and capacity.
- Operating and hiring plans aligned with the forecast and with the size of the raise.
- A clear explanation of how $10M+ will be deployed and what milestones it is intended to support.
Red flags
- Forecasts that are purely top‑down or based on unsupported growth assumptions.
- No documented link between capital deployment and expected outcomes.
- No scenario analysis for slower growth, higher churn, or delayed initiatives.
4. Data Room and Supporting Documentation
Expectations
- Organized access to corporate documents, cap table, key contracts, and historical financials.
- Current versions of core documents with consistent naming and structure.
- A data room that allows investors to test assumptions without repeated requests.
Red flags
- Missing or incomplete documentation for major customers, vendors, or shareholders.
- Conflicting versions of cap tables or key agreements.
- Delays in providing requested documents that should be readily available.
5. Governance, Controls, and Leadership Practices
Expectations
- Governance appropriate to the company’s stage, with documented meetings and decisions.
- Basic internal controls over cash, approvals, and system access.
- Regular use of financial information in management and board discussions.
Red flags
- No regular financial review at leadership or board level.
- Concentration of all key financial activities in one person without oversight.
- Unclear or undocumented roles for finance and operations in key decisions.
Investor Readiness Checklist for a $10M+ Raise
Before launching a $10M+ round, it is helpful to confirm:
- Are our historical financials complete, reconciled, and segmented in a way that reflects how we operate?
- Can we explain our core metrics, cohorts, and unit economics with data that ties back to the P&L?
- Do we have a driver‑based forecast that shows how we plan to deploy $10M+ and what we expect in return?
- Is our data room structured so that investors can navigate and test our assumptions without extensive back‑and‑forth?
- Do our governance and controls reflect the level of oversight that a larger round will require?
Addressing these questions early reduces avoidable diligence friction and keeps the focus on the underlying business rather than on documentation and data quality.
How Northstar Financial Advisory Supports Investor Readiness
If you are planning a $10M+ raise and recognize some of the gaps described above in your own financials, metrics, or documentation, it may be useful to assess your investor readiness before you begin formal conversations.
You can contact Northstar Financial Advisory at: https://nstarfinance.com/contact/.
A discussion would focus on your current reporting, metrics, and planning, and on whether a structured investor readiness and growth planning process like the one outlined here is appropriate for your company.
