Pre-revenue BusinessZero reported revenue means the business model and product-market fit remain unproven, so margins and scalability are hypothetical. Over months this sustains dependency on external funding, raises dilution risk, and makes forecasting cashflow and the timeline to sustainable profitability highly uncertain.
Sharply Contracting Equity BaseA rapidly shrinking equity cushion reduces the firm’s ability to absorb losses or fund development internally. This structural weakening increases the probability of urgent capital raises, limits strategic flexibility, and elevates solvency concerns if operating losses persist over the medium term.
Consistent Negative Cash GenerationPersistent negative operating and free cash flow indicates ongoing cash consumption rather than self-sustaining operations. Over a 2–6 month horizon this necessitates external financing, which can be dilutive or costly, restricting the company’s ability to invest in growth or weather setbacks without new capital.