ARR means nothing: the 4-score AI due diligence scorecard to run before signing an LOI
alex_verem · x · 2026-10-15
Limestone Digital argues an AI company's ARR tells you nothing about success; instead run four risk scores (0 safe, 10 worst) before signing the LOI:
- Model dependency: could the product run on a different model within 48 hours? A moat of prompt + API key scores 10.
- Data: does the company own data competitors can't get, with provenance documented? No training-data disclosure scores 10.
- Talent: how many people can retrain the core product? One engineer, no docs, 18-month earn-out scores 10.
- Substitution: could an off-the-shelf agent do the job tomorrow, or a funded competitor rebuild it in a weekend? Scores 10.
Two scores above 8 means price should follow risk, not growth: escrow, milestone-tied earn-outs, or acqui-hire pricing. The framework builds on Valutico's four axes, packaged as a 4-risk, 16-question, 12-red-flag scorecard.
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