Lessons from 50 Infrastructure Diligence Calls

Over the past year, I've had deep diligence conversations with 50+ infrastructure founders. Payment APIs, developer tools, data platforms, authentication services, fintech infrastructure.

Patterns emerge. Some companies are obviously going to succeed. Others are obviously going to fail. Most are somewhere in between, and small decisions will determine their trajectory.

Red Flags That Predict Failure

1. Founder Can't Explain Unit Economics

If a founder can't tell me their cost per transaction, cost per API call, or cost per active user, they don't understand their business. This isn't about having perfect numbers. It's about having a framework.

The worst version: "We'll figure out unit economics when we scale." No. You figure them out now, or you burn cash at scale.

2. No Monitoring or Observability

I ask: "Show me your monitoring dashboard." If they don't have one, or if it's just basic uptime monitoring, that's a red flag. Infrastructure companies need deep observability. Latency metrics. Error rates. Resource utilization. Alert thresholds.

If you can't see what's happening in your system, you can't fix it when it breaks. And it will break.

3. Single Point of Failure in Architecture

I review the architecture diagram. If there's a single database, single server, or single anything critical, that's a problem. Infrastructure needs redundancy. Not because it's best practice, but because customers depend on you.

The excuse: "We'll add redundancy when we need it." You need it now. Downtime kills infrastructure businesses.

4. Pricing Based on Competitor Benchmarking

Founders who price by looking at competitors rather than calculating costs are guessing. "Stripe charges 2.9%, so we charge 2.5%" doesn't work if your costs are higher than Stripe's.

Price based on your costs and target margins. Then check if that's competitive. Not the other way around.

5. No Runbooks or Documentation

I ask: "If you got hit by a bus tomorrow, could someone else run this?" If the answer is no, or if there's hesitation, that's a problem. Infrastructure businesses need operational documentation. Runbooks for common issues. Deployment procedures. Incident response protocols.

Tribal knowledge doesn't scale. Documentation does.

Green Flags That Predict Success

1. Founder Has War Stories

The best infrastructure founders have stories about production incidents. "We had a database lock at 3am that took down the API for 20 minutes. Here's what we learned and how we fixed it."

These stories show operational maturity. They've been through the fire. They know what breaks and how to fix it.

2. Obsessive About Reliability Metrics

Great infrastructure founders track uptime, latency, error rates, and can tell you the numbers without looking them up. "We're at 99.97% uptime this month, p99 latency is 120ms, error rate is 0.03%."

This obsession with metrics indicates they understand that reliability is their product.

3. Clear Understanding of Technical Debt

I ask: "What's your biggest technical debt?" Good founders have a specific answer. "Our database schema needs partitioning. We're planning to do it in Q2 before we hit 1M transactions per day."

They know what needs to be fixed and when. They're not ignoring technical debt. They're managing it deliberately.

4. Customer Retention Above 95%

Infrastructure companies with high retention have built something customers depend on. If monthly churn is below 2-3%, the product is working. If it's above 5%, something is broken.

Retention is the best indicator of product-market fit in infrastructure.

5. Automated Testing and CI/CD

I ask about their deployment process. The best companies have automated testing, continuous integration, and can deploy multiple times per day safely. They have staging environments. They have rollback procedures.

This operational discipline compounds. It means they can move fast without breaking things.

Common Mistakes by Category

Payment APIs

Developer Tools

Data Platforms

Questions That Reveal Truth

These questions consistently reveal whether a founder understands their business:

Patterns in Successful Companies

The infrastructure companies that succeed share common characteristics:

They Start Narrow

The best infrastructure companies solve one specific problem extremely well. They don't try to be everything to everyone. They pick a niche, dominate it, then expand.

Stripe started with online payments. Twilio started with SMS. Plaid started with bank account verification. They expanded later, after proving the core.

They Prioritize Reliability Over Features

Successful infrastructure companies ship fewer features but make them bulletproof. They invest in testing, monitoring, and operational excellence. They know that one outage can destroy years of trust.

They Understand Their Costs

Every successful infrastructure founder I've talked to can explain their unit economics in detail. They know their costs. They know their margins. They know how costs change at scale. They price accordingly.

They Build for Operators

The best infrastructure is built by operators for operators. The founders have run production systems. They know what matters. They build tools they wish they had.

Patterns in Failed Companies

The companies that fail also share patterns:

They Chase Growth Over Sustainability

They optimize for vanity metrics. Transaction volume, user count, revenue growth. But their unit economics don't work. They burn more cash as they grow. Eventually, they run out of runway.

They Ignore Technical Debt

They ship fast, accumulate debt, and promise to fix it later. Later never comes. The debt compounds. Eventually, the system becomes unmaintainable. They spend more time fixing bugs than building features.

They Underinvest in Operations

They don't build monitoring. They don't write runbooks. They don't have incident response procedures. When things break (and they will), they can't fix them quickly. Customers lose trust.

They Price Too Low

They try to compete on price. They undercut competitors without understanding their own costs. They win customers but lose money on every transaction. Growth makes the problem worse, not better.

The Inflection Points

Infrastructure companies hit predictable inflection points. How they handle these determines success or failure.

What I Look For Now

After 50+ diligence calls, my evaluation framework has evolved. I look for:

These signals predict success better than growth metrics, team pedigree, or market size.

For Founders

If you're building infrastructure, here's what matters:

These aren't sexy. They won't get you headlines. But they'll get you a sustainable, profitable infrastructure business.

And that's what actually matters.

If you're building infrastructure and want an investor who understands these patterns, let's talk.