33 Rejections Out of 40: How SWC Field Analysts Review Projects and Why Most Do Not Pass

Over three months, SWC Field analysts reviewed 40 projects that wanted to present themselves to our community. Only seven made it to the final stage. The most revealing point here is not the number of rejections, but where they occur: 18 projects passed the ownership, economics, and legal checks — and 11 of them still did not pass the analysis. A strong business does not necessarily mean that the participation terms are commensurate with its risks. We explain how we distinguish one from the other and what questions should be asked of any project.

Why Analysis Matters More Than Intuition

Most startups do not fail suddenly. Analytics company CB Insights studied 431 venture-backed companies that had shut down: in 70% of cases, they eventually ran out of money, but that is the outcome, not the cause. The real causes emerged earlier — poor product-market fit (43%), bad timing (29%), and economics that did not add up (19%). All of this can be identified before a person makes a decision about participation, provided they know where to look.

The importance of this is demonstrated by a study conducted by Robert Wiltbank and Warren Boeker for the Kauffman Foundation, one of the most frequently cited studies in the world of private investment. The researchers examined more than 1,100 exits from angel investments. Those who spent less than 20 hours studying a project received, on average, only 1.1 times the amount invested, meaning they earned almost nothing. Those who spent more than 20 hours received, on average, 5.9 times the amount invested, and those who spent 40 hours or more received 7.1 times the amount invested. The study shows a correlation, not a guarantee, but the conclusion is clear: thorough analysis is one of the few factors that a participant can control personally.

This is precisely the work that SWC Field analysts perform — work for which an individual usually has neither the time nor access to the necessary documents.

“The purpose of analysis is not to have a large number of projects on the platform. What matters is that every published project withstands a review of its financial model and risks, and that a person can see what questions we asked the project,” says Alexey Nisanov, Head of the SWC Field Analytics Department.

Four Stages of Analysis

The analysis proceeds sequentially: the next stage begins only after the previous one has been completed. Until it is clear who stands behind the project, there is no point in analysing its economics. Until the economics add up, there is no point in taking up the lawyers’ time.

Stage 1. Who Actually Owns the Project. 6 Out of 40 Did Not Pass

What we check. The entire ownership chain down to the ultimate beneficiaries and the purpose of each intermediary company.

Why it matters. If it is unclear who owns the business, it is unclear who is accountable to participants when something goes wrong. Unnecessary companies in the chain may conceal related parties or sanctions risks, while in the event of a dispute, recovering money through several legal entities in different countries is much more difficult. This is the fastest check, and it filters out some projects with opaque structures.

When a project does not pass. The beneficiaries are disclosed only verbally, no one can explain the purpose of a company in the chain, or what is said at a meeting does not match the documents. Most often, it is unclear who is actually raising the money. There is no legal entity, or there is one, but it does not match what is described in the presentation: the platform, code, and brand belong to one person or company, while the money is being raised for another. Sometimes even the founders themselves cannot say at the meeting who legally owns the product. Analysing the economics in such a situation is pointless: there is nothing for the participant to participate in.

A telling example is a startup from Central Asia developing an AI system for medical diagnostics. In the presentation, several modules were listed as operational. In response to our written questions, it became clear that there was no legal entity, no money in the account, two people on the team, no data for training the model, and in the updated version of the documents, the “operational” modules had been moved into the plans section. The founders themselves acknowledged that development had begun a week earlier. There was simply nothing here for a participant to put money into: no company, no product, and no share that could be formally documented.

Stage 2. How the Project’s Economics Work. 11 Out of 34 Did Not Pass

What we check. We do not take the project’s financial model at face value; we rebuild it ourselves. How much one unit of the business earns — one sale, one customer, one location. Who exactly buys and through which channels. How money moves month by month.

Why it matters. A presentation shows what the project wants to look like; the model shows how it actually makes money. Two of the main reasons startups fail, according to CB Insights — a product that the market does not need in the form presented and economics that do not add up — become visible precisely at this stage. And even an honest model usually calculates returns for the company rather than for the participant. We calculate what a person will actually receive after taxes, fees, and currency conversion. In one project, the presentation promised 190% per annum, while recalculation based on the payment schedule from the project’s own table produced 89%.

When a project does not pass. Most often, the model does not withstand verification against the project’s own figures. A spreadsheet is provided in which ready-made numbers have been entered instead of formulas, making it impossible to trace where the revenue or profit came from. The figures in the presentation and the model do not match: the presentation shows one revenue figure, while the spreadsheet shows half as much; construction costs 5 million in one document and 15 million in another. There are also simple arithmetic errors: profit is divided by 80 units of product, while revenue is calculated based on 100. Another common sign is revenue growth of “plus 30% per year” with no explanation of where that growth will come from. When we rebuild the model and enter figures that the project can substantiate, the attractive returns shown in the presentation usually do not hold up.

Stage 3. What Has Been Done and What Could Get in the Way. 5 Out of 23 Did Not Pass

What we check. What already exists physically rather than merely in the plans. What experience the team has specifically in projects of this kind. What the project critically depends on: a single supplier, a single licence, or a single person. Lawyers check the applicable law, collateral, sanctions lists, and taxes.

Why it matters. A model that adds up describes what will happen if everything goes according to plan. This stage answers the question of what could disrupt that plan. The team’s experience in the specific industry is not a formality: in the same study by Wiltbank and Boeker, investors who understood the project’s industry achieved noticeably better results. At the end of this stage, the project receives a regulatory status: green — it can move forward; yellow — an external legal opinion is required; red — the project does not pass.

When a project does not pass. Most often, it is because a licence turns out to be something different upon verification. The materials may say “regulated company” or “under supervision,” when in reality this refers to anti-money laundering registration, membership in an industry association, or a certificate from a private consulting firm presenting itself as a regulator. The second common scenario is that the product, in the form described, cannot legally be sold in the country where the project intends to sell it.

Stage 4. Is It Worth the Money? 11 Out of 18 Did Not Pass

What we check. We compare the project with other investments of the same risk level that are available to a person right now. We examine what the project terms provide for if the project stops halfway through, how long the money is locked up, and whether it is possible to exit earlier.

Why it matters. This is where the largest number of projects that had previously looked good are filtered out. Risk in private investment is high even among the best projects: in the Wiltbank and Boeker study, more than half of angel investment exits returned less than the amount invested. Therefore, the participation terms must reflect both the level of risk and the duration. If a project offers returns comparable to reliable instruments but carries venture-level risk and locks up the money for several years, it is a poor deal — even if the business itself is sound.

One example is trade financing for copper shipments from Africa to China. An intermediary company purchases copper from a producer and resells it to a buyer, while participants finance the purchase. The transaction structure was clear, and the parties in the chain were identified. The problems emerged when comparing risk and returns. There had not yet been any completed trading cycles under this arrangement. And the second phase required the financing party to provide a cash deposit, meaning that if something went wrong in the chain, the participants would be the first to lose money. The returns for taking such a risk were no higher than those of investments where no deposit was required. The decision was not to place the project on the platform until the pilot cycle was completed and produced actual figures.

The Final Word: Pitch Day Before the Community

Once a project has passed all four stages, the analysts prepare a detailed analysis. But the path to publication does not end there: first, the project takes part in a pitch day and presents itself to the SWC Field community.

Pitch day is an open review. The founders present the project, while analysts and community members ask them questions. This is where things emerge that are not always visible in documents: how well the team understands its figures, how it responds to difficult questions, and whether it is prepared to discuss risks in as much detail as prospects. After the pitch, the community votes and shares its opinion on the project.

Requirements for Projects on the Platform

While the offering is underway, the company may not sell a share to new investors at a valuation lower than the one offered to participants in the placement. Once a quarter, it reports on sales, production, and funds held in its accounts. Participants receive the right to take part in subsequent rounds on the same terms. After the placement, analysts compare actual indicators against the model and monitor whether the funds are being spent for the purposes for which they were raised.

Five Questions Worth Asking Any Project

We ask these questions of every project. Anyone can ask them as well before making a decision about participation — whether in a project from our platform or any other project.

1. Who is the ultimate owner of the company, and why is each intermediary legal entity included in the structure?
2. Can the financial model be opened so that it is possible to see how the figures are calculated?
3. Where will revenue growth come from: which customers, which sales channels?
4. What taxes, fees, and currency conversion costs will affect the terms of my participation?
5. What do the project terms provide for if it stops halfway through, and can I exit before the end of the term?

And there is one more sign that you begin to notice only after reviewing dozens of projects: look at what changes between versions of the documents. A project sends a presentation, then an “updated” version, and in it, without any comment, some modules move from the “operational” section to the “plans” section. No one mentions this in the email; the change becomes visible only if the two versions are placed side by side. Usually, this means that the first version was written for sales purposes, while the second appeared after questions from the analysts.

See the Analysis in Action

At the SWC Field pitch day on 13 October, at 16:00 MSK, projects that have passed the analysis will present themselves to the community, while questions will be asked by SWC founders and leaders of the international community.

Participation is free, and registration is already open via the link https://us06web.zoom.us/meeting/register/lrGTao_EQfeFjlaf-RPaKA

The material is informational and educational in nature and is not individual financial advice.

SWC Field is an information platform and project showcase. SWC Field does not engage in investment activities, does not raise funds, is not a party to agreements between participants and project initiators, and does not provide investment advice. The analysis procedures described do not constitute a legal, tax, or financial opinion, do not guarantee the completeness or accuracy of information provided by project initiators, and do not eliminate risks. Participation in projects involves risks, including the risk of total loss of funds. The decision is made independently by the participant. The material does not constitute a public offer and is not intended for distribution in jurisdictions where such distribution is restricted.