Methodology v2

The complete formula.
Published, not asserted.

Every weight, every benchmark, every penalty threshold is documented here. If you disagree with the model, argue with the math.

This page covers the scoring engine. For the DPR (Detailed Project Report) methodology — projection logic, viability ratios, reconciliation checks, scheme rules — see /dpr/methodology.

How to read a Foundalyze score

Foundalyze scores are indicative, not deterministic. They reflect the quality and completeness of submitted data assessed against a structured framework. Scores are a decision-support signal — not a verdict on a startup’s ultimate viability or investment merit. Founders and investors should interpret scores in context and alongside their own judgment.

Master five-step formula

STEP 1 — Compute four independent dimension scores (each 0–100) F = Financial Viability T = Team & Founder Quality M = Market & Product-Market Fit O = Operations & Legal Readiness
STEP 2 — Linear weighted base LinearScore = F·0.35 + T·0.32 + M·0.28 + O·0.05
STEP 3 — Imbalance penalty (non-linear) if min(F,T,M,O) < 30 → penalty = (30 − min) × 0.5 else if min(F,T,M,O) < 50 → penalty = (50 − min) × 0.2
STEP 4 — Hard floor penalties (capped at −45 total)STEP 5 — Stage adjustment + localisation FinalScore = clamp[5..98]( LinearScore − Imbalance − Floors − Consistency + StageAdj + Localisation )

Dimension weights — evidence-based

Dimension	Weight	Primary evidence	Key finding
Financial Viability	35%	CB Insights / NASSCOM	38% of Indian startups fail due to cash flow
Team & Founder Quality	32%	Payne 2011 ACEF Scorecard, JSR 2024	Scorecard Method assigns 30% to team
Market & PMF	28%	CB Insights, NASSCOM 2025	35% fail due to poor product-market fit
Operations & Legal	5%	NASSCOM 2022	Operations is hygiene, not predictor — extremes via floors

Citations: CB Insights Global Startup Failure Report; NASSCOM India Tech Startup Report 2024–2025; Payne, B. (2011) Scorecard Valuation Methodology, ACEF; JSR 2024.

Regulated-sector weight adjustment

For RBI / SEBI / CDSCO / FSSAI regulated sectors, operational and legal readiness is existential — not hygiene. A fintech without RBI compliance is not a business. Operations weight increases from 5% to 12%, funded by proportional reduction across other dimensions. 67% of Indian fintech failures involve regulatory issues (RBI Annual Report 2023).

Sector class	Financial	Team	Market	Operations
Standard (6 sectors: SaaS, manufacturing, agri, EdTech, logistics, D2C)	35%	32%	28%	5%
Regulated (3 sectors: Fintech/BFSI, Healthcare/MedTech, Food & Beverage)	33%	30%	25%	12%

Dimension 1 — Financial Viability (35%)

F = (CapRatio × 40) + (RunwayScore × 30) + (BurnEfficiency × 15) + RevenueBonus + GrowthBonus
CapRatio = min(CapitalAvailable / CapitalRequired, 1.0)RunwayScore = min(MonthsRunway / SectorBenchmarkRunway, 1.0)BurnEfficiency = max(0, 1 − (MonthlyBurn / SectorMedianBurn) × 0.6)RevenueBonus = +10 if generating revenueGrowthBonus = +5 if MoM revenue growth > 20%

Dimension 2 — Team & Founder Quality (32%)

T = ExpScore + CoFounderSignal + PriorExit + Completeness + EducationSignal − SkillGapPenalty
ExpScore = min(FounderDomainYears / 15, 1.0) × 25CoFounderSignal: solo=+7 | 1+ co-founders=+15PriorExit = +15 if successful prior exitCompleteness = (TeamCompletenessRating / 10) × 20EducationSignal: tech=+5, business=+5 (max +10)SkillGapPenalty: none=0 | minor=−3 | moderate=−12 | major=−25

Dimension 3 — Market & PMF (28%)

Dimension 4 — Operations & Legal Readiness (5%)

Hard floor penalties (cumulative, capped at −45)

#	Trigger	Penalty	Severity
1	Capital available < 35% of required	Up to −21	Critical
2	Runway < 6 months	−25	Critical
3	Major legal / compliance issues	−30	Critical
4	Dominated market + Differentiation < 4/10	−22	Critical
5	Critical skill gap + No prior exit	−20	Critical
6	Growth stage + No customer validation	−18	High
7	High-regulation sector + No GST	−12	High

Stage adjustment

Stage	Adjustment
Idea	−5
MVP	0
Revenue	+5
Growth	+8

Localisation adjustment (Part 25)

LocalisationAdj = BurnNormalisation + TalentMarketAdj + StateSchemeBonus
BurnNormalisationDelta: 0 to +3 pts (lean burn premium)TalentMarketAdj: 0 to −8 pts (skill-gap × local talent depth)StateSchemeBonus: +2 to +3 pts (state-specific startup policies)
Total localisation: capped at ±8 pts.Always shown SEPARATELY in the score decomposition.

Score-band verdicts

Score	Verdict	Investor interpretation
75–100	Investment-ready	Top quartile for stage; runway, team, market aligned.
58–74	High potential — gaps to address	Strong fundamentals with 1–2 addressable weaknesses.
40–57	Needs significant rework	Multiple dimension gaps; structural improvement needed.
5–39	Not viable in current form	Fundamental viability gaps; pivot likely required.

Consistency Validation Rules

Every submission is validated against a set of consistency rules before scoring begins. These rules detect arithmetic impossibilities, statistical implausibilities, stage-claim contradictions, and cross-validation failures between self-reported inputs.

Rules are applied in three severity tiers:

Impossible — Scoring is blocked. The submission cannot proceed until the contradiction is resolved.
Highly Improbable — Scoring continues with a penalty applied and the flag shown in the report.
Weak Anomaly — Scoring continues with no penalty. A soft warning is shown in the report only.

Rule ID	Category	Trigger condition	Severity	Penalty	Rationale
C-01	Arithmetic	Team of 15+ with zero burn	Impossible	Blocks scoring	Payroll cannot be zero at this team size in India.
C-02	Arithmetic	Capital available > 1.5× capital required	Impossible	Blocks scoring	Likely a unit-error or copy-paste mismatch — capital ratios are bounded by reality.
C-03	Arithmetic	Revenue > 0 with zero paying customers	Impossible	Blocks scoring	Accounting inconsistency — revenue requires a payer.
C-04	Arithmetic	Gross margin > 95%	Impossible	Blocks scoring	No legitimate business model in our 9 sectors clears 95% gross margin.
C-05	Arithmetic	Physical sector (manufacturing / agri / F&B) with no facility	Impossible	Blocks scoring	These sectors structurally require land, plant, or kitchen space.
C-06	Arithmetic	Fintech / healthcare claiming none / low regulatory burden	Impossible	Blocks scoring	RBI / SEBI / CDSCO oversight applies by law — claim is impossible.
C-07	Arithmetic	Burn = 0 with non-zero team	Impossible	Blocks scoring	Salaries, infra, and rent cannot all be zero simultaneously.
C-08	Arithmetic	MoM growth > 0 with revenue = 0	Impossible	Blocks scoring	Growth is undefined when the base is zero.
C-09	Statistical	Differentiation 9–10/10 in a dominated market	Highly Improbable	−8 pts	In a market with 2–3 dominant players, near-perfect differentiation is implausibly high self-rating.
C-10	Statistical	Burn > 5× revenue at Growth stage	Highly Improbable	−6 pts	Cash dynamics inconsistent with a Growth-stage business; signals stage misclassification or cost-discipline issue.
C-11	Statistical	Healthy LTV:CAC (> 3:1) with churn > 8%/month	Highly Improbable	−8 pts	These two metrics are mathematically inconsistent — high churn caps LTV.
C-12	Statistical	Hardware / manufacturing gross margin > 75%	Highly Improbable	−6 pts	Hardware / manufacturing margins above 75% exceed the plausible band.
C-13	Statistical	Team size > 20 at Idea stage	Highly Improbable	−5 pts	Idea-stage businesses with 20+ employees are usually misclassified — likely at MVP or beyond.
C-14	Statistical	TAM > ₹10,000 Cr with no named competitors	Highly Improbable	−5 pts	Markets that large always have prior entrants — absence of named competitors signals shallow research.
C-15	Statistical	Runway > 36 months with stated burn	Weak Anomaly	None	Please verify burn includes payroll, infra, and opex — not just cash outflow.
C-16	Statistical	Capital required < monthly burn × 6	Highly Improbable	−4 pts	Funding ask undersized for the runway; under-asking is a planning weakness.
C-17	Stage contradiction	Growth stage + zero customers	Weak Anomaly	None	Growth stage requires customer validation by definition. Stage is downgraded and noted in the report.
C-18	Stage contradiction	Fintech generating revenue without GST	Highly Improbable	−10 pts	Compliance violation — fintech revenue without GST registration is statutorily impermissible.
C-19	Stage contradiction	Idea stage + revenue > ₹10L / month	Weak Anomaly	None	Self-claimed Idea stage with material revenue is a misclassification.
C-20	Stage contradiction	MVP stage + 50+ paying customers	Weak Anomaly	None	MVP claim with material customer adoption is a misclassification.
C-21	Stage contradiction	High-regulation sector with no compliance acknowledgement	Highly Improbable	−8 pts	No GST + no Udyam + no legal-issue declaration in a high-reg sector — compliance posture unclear.
C-22	Stage contradiction	D2C / retail with no online-presence indicator	Weak Anomaly	None	D2C distribution usually implies a digital channel; a missing online keyword is a soft strategy signal, surfaced as an anomaly rather than scored.
C-23	Stage contradiction	Manufacturing without factory space	Highly Improbable	−5 pts	Production capacity is unclear without a stated factory.
C-24	Stage contradiction	SaaS + gross margin < 40%	Highly Improbable	−6 pts	Significantly below the 65–75% sector band — unit economics or pricing model needs review.
CV-1	Cross-validation	PMF confirmed with zero paying customers AND no LOIs	Impossible	Blocks scoring	PMF cannot be confirmed without customers OR signed letters of intent — the claim has no evidence base.
CV-2	Cross-validation	Paying customers claimed but monthly revenue is zero	Highly Improbable	−10 pts	Paying customers must produce revenue — these two fields are mathematically linked.
CV-3A	Cross-validation	Prior exit claimed but no exit year provided	Highly Improbable	−5 pts	A prior exit is a verifiable historical fact — the year is the minimum corroborating detail.
CV-4	Cross-validation	Differentiation rated 7/10 or higher but no description provided	Weak Anomaly	None	A high differentiation self-rating without a clear description suggests over-rating; flagged for reviewer attention.
CV-5	Cross-validation	LOIs claimed but LOI count is zero	Impossible	Blocks scoring	Claiming signed letters of intent with an explicit count of zero is a direct contradiction.
CV-6	Cross-validation	MoM growth > 20% with zero revenue	Impossible	Blocks scoring	Percent growth is undefined on a zero base — the growth claim cannot stand without revenue.
CV-7	Cross-validation	Co-founders listed but team completeness rated below 4/10	Weak Anomaly	None	Co-founders should raise team completeness; a very low rating with co-founders present is an internal contradiction worth surfacing.
CV-3B	Cross-validation	Prior exit year is within 3 years of (or after) this company’s founding date	Highly Improbable	−8 pts	A genuine prior exit is from a separate venture wound down before this one was founded — the spec requires at least a 3-year gap to filter out same-company or post-founding exits being claimed as prior wins.
CV-3C	Cross-validation	Founding year not provided — exit year validation skipped	Weak Anomaly	None	Without a founding year the exit-year plausibility check (CV-3B) cannot be evaluated; the report surfaces the skip so reviewers can request the founding date.

All benchmark sources reviewed annually: NASSCOM (Jan), SIDBI MSME Pulse (quarterly), Bain India (annual), Redseer (annual), NABARD (Apr), RBI Digital Payments (May), KPMG EdTech (annual), DPIIT (quarterly).

The complete formula.Published, not asserted.