Manufacturing Readiness Due Diligence

Capital is moving into hard technology faster than the means of making it. This is the method for establishing how far a company’s technology has run ahead of its making, before an investment, acquisition or supplier qualification decision is taken.

Batteries, robotics, advanced materials, defence systems and quantum hardware are funded on the strength of what has been shown in a laboratory or on a pilot line. Whether the same product can be made at rate, at cost and at yield, by people who did not design it, is a separate question, and it is usually answered after the money has been committed.

Technology Readiness Levels, developed at NASA in the 1970s, measure whether a technology works. Manufacturing Readiness Levels, codified by the US Department of Defense, measure whether it can be produced. Most diligence reports the first and infers the second.

The method

A consistent method gives investors a number they can compare across deals, acquirers a read on what the line will face on day one, and boards a basis for pricing manufacturing risk into milestones and earn-outs. Because each note expires, a rating given before one funding round cannot be carried forward as evidence into the next.

Why readiness is hard to judge

• Technology ahead of production. Companies are funded and valued on the technology gate they have passed. The manufacturing gate commonly lags by several levels, and the lag is rarely reported to the people paying for it.
• Unattested opinion. Expert-network calls and generalist technical audits produce views that are unsigned, ungraded and unrecorded, so nobody can later establish which views proved right.
• Know-how held by a few. The knowledge that makes a process repeatable sits with a small number of people, often near retirement, and is rarely written down. It does not appear in a data room.
• First article taken as proof. One good part shows that something can be made once. The nth consecutive unit from one route, at cost and at rate, by people who did not design it, is what separates a process from luck.
• Opaque supply chains. Critical inputs, tooling and qualification often sit beyond Tier 1 and outside the target’s control, which is where scale-up programmes most often stall.

How the findings stay straight

The method is fixed and versioned, so a note given to one company can be compared with a note given to another. Automated triage and desk research carry the volume of each assessment, and engineers carry the judgement.

• Each note is signed by a named person and recorded on an append-only register.
• Findings are reviewed before issue and can be held or lowered. No finding is raised by negotiation.
• Where a company commissions its own assessment, the fee is fixed before scoring begins and the method is unchanged.
• Gap-closure work is not sold to a company assessed in the same cycle.
• Every assessment is to be set against what the company goes on to deliver, and each note issued adds to the calibration record.

The instruments

• The Coupling Gap. A graded read on the distance between how far a company’s technology has come and how far its making has. In development; the scale and the publication rules are being back-tested before either is published.
• Question pack and evidence grading. A fixed, versioned pack, used unchanged on every assessment, which is what makes notes comparable. Every claim is graded by the quality of its source, and a claim cannot carry a score its evidence does not support.
• Factory-scale assessment. For plants, production lines and acquired assets, the method extends to installed equipment: whether it can hold the rate, tolerance and uptime the investment case assumes.
• Calibration register. An append-only record of every note issued, to be set against later outcomes. Over time it shows which evidence predicted delivery and which did not, and it is the basis on which the method is revised. Back-tests against public-record cases are shared with qualified buyers under NDA.

Who it is for

Investors and allocators before the cheque. Acquirers and corporate development before signing. Operators and boards before a capital programme is committed. Each is grouped by the decision in front of them rather than by sector.

The work is carried out by Manufacturing Engineers who have built, bought and backed production at scale, and each note is signed by a named person. Kaipability works for the party carrying the downside and holds no transaction mandates and no success fees.