08.12 Hardware Fundraising and Investor Due Diligence: Telling the Business Story with Data from This Knowledge Base

Governance metadata | Owner: Research Lead | Last reviewed: 2026-10-22 | Next review: 2027-01-31

Operating data has to be turned into a fundraising narrative; external commitments are governed by what Finance and Legal have approved. Figures follow the P&L and PSI in this knowledge base.

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1. Investor FAQs vs. the Answers in This Knowledge Base

Question	Which document to use	Key framing
Unit economics?	07.06	Three scenarios plus post-provision net profit — never report pre-provision figures on their own
How long does the cash last?	07.07	Includes the NRE peak and the week cash flow turns positive
Will the first order squeeze us?	03.04 / 03.05	Order lock-in safety factor + 8-week PSI
Supply cutoff / recall?	03.06 / 07.05 / 07.09	There is a playbook and layered insurance
Is the channel replicable?	05 regional guides + KA/MAP	Use regions that are already proven; do not oversell markets you have not entered
AI cost?	07.10	The token line item and its red line
Team?	01.03	Competency profile and gaps in critical positions

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2. Narrative Structure (6 pages recommended)

1. The problem and category selection (01.05 / 02.01)
2. Product and differentiation (02 / 08 projections)
3. Unit economics and BEP (07.06)
4. Channels and growth stage (05)
5. Risk matrix (03.06 / 07.09 / 07.02)
6. Use of funds: the tooling / certification / inventory / marketing ratio and milestones

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3. Due Diligence Document Pack

• [ ] Three-scenario P&L + post-provision net profit

• [ ] Order lock-in and cash model

• [ ] Certification progress and reports

• [ ] Patent / FTO status (07.11)

• [ ] Supplier agreement summaries (redacted)

• [ ] Attribution and repeat purchase (if applicable)

• [ ] Recall / insurance status (07.09)

• [ ] Dual-sourcing scan conclusions (03.06)

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4. Red Lines

• Do not write "validated PMF" before any order has actually occurred
• Never present pre-provision net profit on its own as "safe"
• Do not present TAM in a market you have not entered as "already captured"
• Move legal and tariff conclusions into the appendix and mark them "subject to official sources / legal review"
• When figures conflict with projections such as 08.02, the main-case financial table takes precedence and the assumptions must be explained

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5. Common Failure Modes

1. Talking about revenue only, with no post-provision net profit
2. A cash table that leaves out NRE
3. A channel story with no MAP or return assumptions
4. AI costs never entering the model
5. Due diligence materials that do not reconcile with the 07.06 figures

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6. Related

07.06 / 07.07 / 03.04 / 03.06 / 08.02 / 07.09

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7. One-Page Financial Summary Template (Appendix Page)

Item	Figure
MSRP / Landed	/
Post-provision net margin (Scenarios A/B/C)	/ /
BEP
Cash peak including NRE
Week cash flow turns positive
Free tier: annual cloud cost / gross margin (if AI)

8. Boundary with the 08 Projections

• Projections can tell the story, but the figures in the fundraising appendix follow 07.06/07.07
• Any change to projection assumptions must come with an attached "assumption diff" page

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7. Story-to-Number Consistency Check

Check item	Pass criterion
PPT figures vs 07.06	Consistent, or an assumption diff is attached
Cash page	Includes NRE
Channel page	Has MAP / return assumptions
AI page	Has the 07.10 red line
Risk page	Has 03.06 / 07.09

8. Investor Challenge Q&A Script

Q: How can the gross margin be so high and yet there is still no profit?
A: The structure of provisions and pre-marketing investment (use the 07.06 line-item breakdown).

Q: What about tariffs?
A: Three scenarios plus a contingency playbook (07.08) — do not report the baseline only.

9. Document Naming Convention

ProjectName_DueDiligencePack_YYYYMMDD, containing: the finance folder, the certification folder, the IP folder, and the redacted supply-chain folder.

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10. Due Diligence FAQ Library (Hardware)

Question	Standard answer structure	Taboos
Why now?	Category window + technology maturity + channel window	Story without data
Why you?	Team + supply chain + differentiation	Disparaging the whole industry
Why does gross margin fluctuate?	Three-factor sensitivity: tariffs / FX / advertising	Concealing provisions
Inventory risk?	PSI + safety factor + dual sourcing	Empty "zero inventory" claims
Policy risk?	Compliance checklist + legal boundaries	Claiming "fully compliant"

11. Use of Funds Table (default allocation, adjustable)

Use	Typical share of the first round	Linked milestone
Tooling and certification	20–30%	GR2 complete
First-batch inventory	25–35%	Order lock-in model
R&D iteration	15–25%	Version release
Market spend	15–25%	CAC target met
Operations / legal / contingency	10%	—

12. Monthly Operating Pack (for the Board)

1. One-page metrics dashboard (aligned with 01.14)
2. Actual P&L vs 07.06
3. Cash vs 07.07
4. Channel TOP5 and MAP events
5. Risks: supply cutoff / recall / compliance

13. Narrative vs 08 Projection Boundary Statement Template

The product projection figures in this material are used to illustrate the method; the figures in the investment decision appendix follow the archived Finance P&L / cash model. Changes to projection assumptions are shown on the appendix diff page.

14. Pitch Time Allocation (12-minute version)

Segment	Minutes
Problem and product	3
Unit economics and cash	3
Channel and growth	2
Team and milestones	2
Use of funds and risks	2

16. Valuation Narrative Anchors (conceptual, not valuation advice)

Anchor	What to anchor it on
Market	TAM from external reports + top-down sizing; SOM from the channel plan
Unit economics	Post-provision net profit + the week cash flow turns positive
Growth	Replication of already proven channels; do not fabricate a GMV curve
Moat	Certification / patents / supply chain / brand, mapped to 07.11/03.06

17. Information Memorandum (IM) Table of Contents

1. Company and market
2. Product
3. Finance and model
4. Channel
5. Team
6. Risks
7. Appendix number sources (pointing to 07.06/07.07)

18. Strategic Investors / Industry Partners

Industry partners can be engaged on supply-chain dual sourcing (03.06) and channels; financial investors focus on cash and unit economics.

19. Internal Preparation Timeline

Week	Action
-4	Freeze the document pack
-2	Internal challenge session
-0	Pitch
+2	Data room update

21. Appendix Number Sources Cross-Reference (Due Diligence Data Room)

Cover figure	Must equal	File
Post-provision net margin A/B/C	07.06 table	Finance Model.xlsx
Cash peak including NRE	the two rows in 07.07	Cash Model
BEP	07.06	Same as above
Recommended first-order quantity	03.04	Order Lock Base export
Annual AI cloud cost / gross margin %	07.10 worked example	If applicable
Recall cash gap (scenario)	07.09 table	If applicable

Rule: If the data room and the PPT disagree → the data room takes precedence and the PPT must be updated; running the pitch with two sets of numbers is prohibited.

22. Sensitivity Page (mandatory)

Variable	Low	Mid	High	Impact on post-provision net margin
Tariff	7.5%	25%	35%	07.06
Ad efficiency	ROAS 2.0	1.5	1.0	the marketing expense row
Cloud	calls 20	40	80	07.10
Refund rate	3%	8%	15%	the RMA row

Narrative: Do not report the mid case only; spell out "under what conditions we cross the 10% red line".

23. One-Page Risk Card with 03.06 / 07.09

Risk	Existing playbook	Residual risk
Supply cutoff	03.06	Open red flags=__
Recall	07.09	Coverage gap=__
Tariff	07.08	High-tariff share=__

If residual risk > 0, raise it proactively during the pitch so that due diligence does not ambush you.

24. Checklist (Final)

• [ ] The data room cross-reference table has been checked

• [ ] The sensitivity page is in place

• [ ] The residual-risk items on the risk card have been filled in

• [ ] No dual sets of numbers across the PPT and the data room