The Four Questions Institutional Diligence Always Asks
Every serious institutional meeting you will ever take has four questions sitting quietly behind it. They are rarely asked out loud in the first meeting. They are always asked after it, in a room you're not in, and whatever answers exist in that room are the ones that decide what happens next.
I've spent years watching technical companies meet institutional buyers, and the pattern doesn't change. The founder walks out saying "that went well." The institution walks out and assigns someone to answer four questions. If the founder's materials answer them, the deal keeps moving. If they don't, someone inside the institution guesses, and institutional guesses about crypto companies are not generous.
Here they are, in the order they get asked.
1. Custody: who actually holds the thing?
Not which technology secures it. Who holds it, under what legal structure, and what happens to it if you disappear. A risk officer hearing "self-custodial smart contract architecture" writes down "unclear." The answer that works is boring on purpose: named entities, named jurisdictions, named regulated custodians where they exist, and a plain-language account of whose balance sheet the asset does and does not sit on.
The test: could the person you met explain your custody arrangement to their boss in two sentences, without you in the room, and be right? If not, you don't have a custody answer yet. You have a custody diagram.
2. Regulatory structure: what are you, legally?
Institutions don't need you to be fully regulated everywhere. They need to know exactly what you are and what you are not, because their compliance team has to file you somewhere. A company that says "we operate under X exemption in Y market, we are registered as Z here, and here is what that means for you as a counterparty" is easy to file. A company that says "regulation is evolving and we're engaged with policymakers" is impossible to file, and unfileable companies don't get approved.
Ambiguity reads as risk even when the underlying reality is fine. The work is writing the reality down precisely.
3. Counterparty risk: who am I actually exposed to?
When an institution uses you, it isn't taking one exposure. It's taking yours plus everyone you depend on: the custodian, the oracle, the market makers, the chain itself, the stablecoin issuer in your settlement flow. Diligence will map that chain whether you help them or not.
The teams that win hand over the map themselves. Every dependency named, and for each one, an answer to the only question that matters: what happens to our client if this party fails? Doing this work for the institution signals something no deck can: that you think like a counterparty, not like a protocol.
4. Redemption mechanics: how do I get out?
This is the question institutions care about most and founders prepare for least, because founders think about the product working. Institutions think about the day it doesn't. How does a client exit? How fast? Through whom? And the version that actually decides the deal: what does exit look like in stressed conditions, when everyone wants out at once?
If your redemption answer only covers the sunny day, an allocator will model the rainy one on their own assumptions. You will not enjoy their assumptions.
What to do with this
Write the four answers down. Not talking points, written answers, in plain institutional English, in a document you can hand over before you're asked. In diligence, an answer that exists on paper before the question is asked is worth roughly ten answers improvised in the room, because the paper version proves the thinking predates the pressure.
When those four answers exist and every one of your materials tells the same story around them, institutional conversations change shape. The meetings stop being interrogations that feel like interest, and start being interest that survives the room you're not in.
Want to know how your current answers hold up? The Readiness Scorecard tests all four areas in three minutes. Or skip straight to a call.