So you have a business idea… Now the question is whether it’s worth pursuing.
And the way most people answer that question usually goes something like this: you run it by a few people you trust, get some encouraging responses, and take that as confirmation. Maybe if you’re feeling ambitious you write a business plan. Or maybe you write the business plan to avoid taking any real action at all, because a plan feels like progress without requiring you to find out whether the idea actually has legs.
I’ve worked in venture capital for over a decade, and what I do is something very different.
Working in this industry means I see the inside of hundreds, if not thousands, of businesses every year. And by inside I mean I see everything: the financial models, how the business model actually works, the cashflow, the customer acquisition costs, the salaries. All the skeletons in all the closets. I see it all.
And the interesting thing is that often at face value, some of the most compelling businesses (or first encounters of businesses) would have made terrible investments once you get under the hood and see what is actually going on.
So let’s talk about what’s actually going on under the hood. How investors really evaluate deals, what we’re looking for before we’ve even had an initial chat with you, and how you can apply the same framework to your own business decisions before you commit your time, your money, and a meaningful portion of your life to an idea.
Why your instincts about your idea are probably wrong
Around 600,000 new businesses are registered in the UK every year. Of those, roughly half won’t make it to five years. Of the ones that do survive, the vast majority will plateau somewhere between keeping the lights on and being worth having built at all.
The gap between the businesses that work and the ones that don’t is not, in most cases, execution. Most of the businesses that stall or fail were never going to get where their founders wanted them to go, not because the people weren’t capable, but because the idea was evaluated wrong before a single decision was made.
The problem is that you are the worst possible person to assess your own ideas objectively. You came up with it, you’re excited about it, and your brain is already running a film about how it’s going to go. Researchers call it the planning fallacy: the consistent human tendency to underestimate how long things will take, how much they’ll cost, and how many things will go wrong, while simultaneously overestimating the outcome. It affects everyone. It affected me in the early businesses and it still shows up now if I’m not deliberate about checking it.
The people you ask for feedback aren’t much more reliable. People who care about you don’t want to be the one who talked you out of something. People who don’t know the space well enough will give you generic encouragement. Getting a room to nod along with your idea is one of the easiest things you can do, and it tells you almost nothing.
What cuts through all of this is filters. Not a feeling, not a consensus, not a business plan built around the assumption that the idea is good. A set of specific questions where the answers are either yes or no.
But before the filters, there is a question that comes before all of them. It’s the one every investor assessing before anything else.
The first question every investor asks — and you should too
Before an investor evaluates anything else about your business, they are asking one question: is this a venture business or a lifestyle business and how do we make back our money?
Those are not value judgements. They are structural categories, and they require completely different evaluations. Getting this wrong at the start (applying venture-scale filters to a lifestyle business, or bootstrapping something that needs outside capital to work) is one of the most common and most expensive mistakes founders make.
A lifestyle business is one designed to generate personal wealth for its founder without external capital. A consultancy. A service business. A Substack. A product with a defined ceiling. These can be exceptional businesses. They can generate £200k, £500k, a million a year. They can fund a genuinely very nice life. But what they are not, structurally, is a vehicle for outside investors to make a return. And that’s fine, because that’s not what they’re for.
A venture business is one with the potential to scale significantly beyond the founder, return capital to investors, and eventually exit. A fintech platform, a synthetic fuel, a new consumer beauty brand. These businesses require capital to reach their potential, and they are evaluated on completely different terms.
When an investor is hears about your business for the first time they are doing a specific calculation in their head. It works like this: if I invest in this business at this valuation, and it performs well and exits, can I make my money back? To break even on a fund, an investment needs to return at least 2x. To be considered a real fund returner, the outlier that justifies the whole portfolio, you’re looking for 10x.
So if you’re raising money at a £1m pre-money valuation and an investor puts in £100k, they own roughly 10% of your business. For them to get 2x back, your business needs to exit at £2m. For 10x, it needs to exit at £10m or more. Those are actually small numbers in venture terms (the maths gets significantly more complex as valuations and round sizes grow) but the principle is the same at every stage. Every investor in runs this calculation, and if the answer doesn’t work, nothing else in your pitch matters.
So before anything else: which kind of business are you building?
Does this have legs?
OK, now you’ve decided what path you are going down, I have five filters I use to decide if something has legs. You can apply these to any kind of business but you do need to consider and pass all five to determine if you idea has legs and if it is worth pursuing.
Filter 1: Is the problem real, and is there a paying customer attached to it?
This is the first filter and the one that kills the most ideas early, which is exactly what it’s supposed to do.
A real problem is not a problem you’ve identified. It’s not a gap you’ve noticed, a frustration you’ve experienced, or a thing you believe people would find useful. All of those can be problems, but they can equally be imagined ones, and the only way to tell the difference is whether people have already demonstrated willingness to pay for a solution.
What you’re looking for is a market that exists, not a market you’d have to create. The word “educate” is a red flag in a pitch for this reason. If your go-to-market strategy involves educating the customer about why they need this, you’re trying to create demand rather than meet it, and that is a far more expensive and uncertain proposition than you’re probably accounting for.
The strongest version of Filter 1 is what I saw in a pre-seed synthetic fuel business I invested in. The technology was early stage, the team was still building, and by most conventional measures it was far too nascent to be considered de-risked. But they had a purchase order from a large conglomerate. At pre-seed. Before the product was fully developed. That purchase order was the answer to Filter 1 in the clearest possible terms: here is a real problem, here is the customer, and here is proof they will pay for the solution because they have already committed to doing so. It wasn’t a signal, it was a fact.
Most ideas don’t have a purchase order. Most of the time what you have is something weaker: the market research says the TAM is large, or five people you asked said they’d probably use it, or there’s a competitor in the space so the demand must exist. These are useful data points but they are not the same thing, and it’s worth being honest with yourself about which category your evidence falls into.
The question to answer: can you point to evidence that real customers in this market have paid money for a solution to this problem, and if so, is your solution meaningfully better, cheaper, or more accessible than what already exists?
Personally, I think the second best solution to pre-orders on a product or a purchase order, is third party consumer research of a minimum of 1,000 respondents clearly articulating the problems they face in the market and that they would be willing to buy your product if it existed.
Filter 2: Does the timing work?
This is the filter most people skip entirely, because it requires thinking about factors largely outside your control, and most people find that uncomfortable. It is also, in my experience, the one that most often determines whether a good idea actually becomes a good business.
Timing has two components. The first is market readiness: is the infrastructure, regulation, customer behaviour, and competitive landscape in a place where this business can actually grow right now? The second is window: is there a clear path to building before the market either closes or gets crowded?
A business can have the right idea, the right founder, and a genuine paying customer base and still fail on timing. The market wasn’t ready for it yet, or the regulatory environment made it impossible to operate at scale, or by the time the conditions were right, three better-capitalised competitors had moved in. I’ve seen all three happen to businesses that were, on paper, genuinely strong and I’ve experienced this first hand myself.
The question to answer: if you were to start this business today and build at a realistic pace, would the market conditions that make it viable still be in place in eighteen to twenty-four months when you reach the point of needing real traction? And is there a reason to move now rather than wait?
Filter 3: Can you reach the number?
This is where you do the maths, and you have to do them from the top down, not the bottom up. You also need to use a spreadsheet. Sorry.
Bottom-up maths are what most people do: they start with what they can sell and extrapolate. If I get ten clients at £2,000 a month, that’s £20,000 a month, that’s £240,000 a year. The problem with this is that it assumes growth is linear and that ten clients becomes twenty becomes forty without accounting for what that actually requires.
Top-down maths start from the number you need and work backwards through the model to see whether the path exists. What does this business need to produce to be worth your time and the risk you’re taking? What does the market size support? What’s the ceiling on this specific model, and does that ceiling clear the floor you need?
For a venture business, the number isn’t just your personal income target. It’s the exit number. If you’ve raised at a £5m valuation, the investor who put in £500k needs to see a realistic path to an exit at £5m minimum for a 2x return, and £50m or more for the kind of return that justifies the risk. Can your market support that? Can your model get there? These are not rhetorical questions — they have answers, and the answers are either yes or no.
For a lifestyle business, the number is simpler: does this model produce the income you need, at the margin you need, without requiring a version of the business you don’t want to run? Some models are perfectly viable at £200k a year but require 80-hour weeks and operational complexity that is incompatible with the life you’re building. Others are lean at the same revenue. Knowing which one you’re looking at before you start is not optional information.
The question to answer: working backwards from the number that makes this worth doing, whether that’s a personal income target or an exit valuation, is the model capable of getting there within a realistic timeframe, and does the version of the business that produces that number look like something you want to run?
Filter 4: Do you have the specific edge — and can you hold it together when everything goes wrong?
Unfair advantage takes different forms. It can be domain expertise so deep that you see problems other people don’t notice yet. It can be a network that gives you access to customers, partners, or distribution channels that would take years for someone else to build. It can be proprietary insight from years of operating in the space. It can be a track record that makes the people you need to work with take you seriously immediately.
What it is not is enthusiasm. It is not having spent three weeks researching the market. Those things are a starting point; they are not an edge.
There is a version of this where naivety is the advantage. And I’ve seen enough founders prove it that I take it seriously.
These are the ones who will tell you: if I’d understood this market as well at the start as I do now, I wouldn’t have gone in. The knowledge would have killed the conviction before it had a chance to prove itself. What those founders had wasn’t ignorance working in their favour. It was the absence of received wisdom about why things had to work a certain way, which meant they didn’t build around constraints that turned out to be optional. Naivety can be part of an edge if it produces boldness rather than blindness. The question is whether, when you strip away the excitement of the new idea, there’s something underneath it that is specifically yours.
Beyond the market edge, there is the question investors are asking in parallel the entire time you’re pitching: how is this person going to cope when everything goes wrong? Because here is what every experienced investor knows going into a deal… the business plan is wrong. Not probably wrong. Wrong. The timeline is too optimistic. The costs are underestimated. The revenue curve is too steep. You’re coming back for more money. We know this not because we’re pessimists but because we are running this assessment across hundreds of deals a year with a portfolio that spans dozens of businesses at any given time. There is not a rodeo we have not seen.
So when we’re nodding along in that first meeting, what we’re also doing is running a read on the founder. When the cyber attack happens, when a key hire leaves, when a major customer churns, when the market moves (and all of those things will happen, in some combination, at some point) how is this person going to respond? Because how the founder responds in those moments almost entirely dictates what happens to your money. Your biggest risk as an investor, when you put money into an early-stage business, is not the market. It’s the person.
When investors say we back the person not the business, this is what they mean. Someone who can hold their nerve without losing their humanity. Who can make payroll under pressure. Who can lead a team through a hard quarter and come out the other side. Who can take a hit, take a breath, and say — right, this is what we’re doing about it.
The clearest illustration I have of what this looks like in practice is a fintech business I invested in where the founders had self-financed the business to product and initial customers before seeking outside capital. No investor money. No safety net. They had built the thing, found the first customers, and proved the model with their own resources. That tells you something about founders that no pitch deck can replicate: they back themselves, they know the space well enough to have built something people will pay for without external validation, and they have the kind of resilience that means the next stage is a matter of execution rather than hope.
This is also why investors like second-time founders. Not because their first business necessarily worked (it often didn’t) but because they’ve already made the mistakes that everyone makes. They know themselves. They’ve been against a wall and they know what they do when they get there. That pattern recognition about yourself, about how you actually behave under pressure rather than how you imagine you would, is something you can only get from having done it before.
The question to answer: what specifically do you have that means you are the right person to build this, and when things get hard, which they will, are you the person who figures it out?
Filter 5: Can the business run without destroying your life?
This one doesn’t appear in most investor frameworks because investors don’t have to live inside the companies they back. You do.
Every business has a build cost. There’s the financial cost, which most people account for. There’s the time cost, which people underestimate. And there’s what I’d call the life cost: what does the day-to-day of running this business actually feel like, and is that sustainable for the number of years it will take to reach the outcome you want?
Some businesses are structurally incompatible with the life you’re trying to build. Not because the revenue potential isn’t there, but because the model requires things from you that conflict with your other priorities in ways that don’t resolve. A high-touch service business that requires your constant presence is a different life to a digital product business that runs independently. Neither is wrong in the abstract; they’re only wrong if one of them is the life you don’t want to be living in three years.
This filter is not about avoiding hard work. It’s about being deliberate, before you start, about what you’re actually signing up for. Because the version of the business that exists in your head when you’re evaluating the idea is almost always more manageable than the version that exists in reality at eighteen months in, when you have customers and team and operational complexity and the whole thing is pulling at you constantly.
The question to answer: if the build phase of this business takes two to three years and looks harder than you currently expect, does the life you’d be living during that period still make sense to you?
All five filters need to pass. One no, a real no, not a “probably yes if things go well”, is enough to stop. The filters are not a scoring system where four out of five is a strong result. They’re a checklist, and the point of a checklist is that it only means something if you use it without editing the answers.
What do you do when the idea doesn’t work?
A no on the filters is not a no to you. It’s information, and the most useful thing you can do with it is understand what kind of no it is, because they point in different directions.
The first question to ask is whether you have the wrong type of business or the wrong structure for the business you actually have. A common version of this: you’ve been thinking about your idea as something you’d bootstrap and grow independently, but when you run the numbers honestly, the model only works at a scale that requires outside capital to reach. That’s not a no to the idea, it’s information about the path. A venture-backed version of the same business might pass all five filters comfortably. The question is whether you want that version, because it is a genuinely different life.
The reverse is equally common and equally worth catching early. A business that has been pitched as a venture opportunity, that has perhaps even taken early investment on that basis, but which structurally cannot return the capital that was put into it. Not because it’s a bad business, but because it’s a lifestyle business in venture clothing. The honest answer in that situation is to restructure, buy out investors if possible, and run the business on its own terms rather than spending years trying to hit metrics it was never designed to hit.
A timing no means the idea may be sound but the conditions aren’t right yet. Sometimes it’s worth watching a market for six or twelve months before moving. Sometimes the window closes before it opens properly and the right move is to put the idea down and redirect the energy.
Sometimes the no is about fit rather than idea or timing. You might be looking at a business that is genuinely viable, the problem is real, the market is ready, the numbers work, but where you don’t have the specific edge, the right network, or the positioning to be the person who builds it. That’s worth sitting with rather than pushing through. The edge you do have tells you more about where you should actually be building than any amount of enthusiasm for the idea in front of you.
But let me be clear: running these filters on your own ideas is not a way to talk yourself out of things. Most people who use a framework like this seriously will find it sharpens their thinking about the right idea rather than eliminating ideas altogether. The businesses that pass all five filters tend to be the ones where the founder already knew, at some level, that it was right. What the filters do is give them the structure to act on that with confidence rather than just hope.
The ones that fail the filters tend to be the ones where, if you’re being honest, you already knew something was off. You just needed someone to ask the question clearly enough that you couldn’t avoid the answer.
I love how you laid emphasis on treating ideas as hypotheses to be tested rather than dreams to be defended. The distinction between a venture business and a lifestyle business is particularly important. Too many founders chase venture-scale outcomes with businesses that are fundamentally designed to generate personal income, or vice versa. Understanding which game you're playing changes almost every decision that follows.
This was laid out so well. I found myself nodding along to so many parts!!