What is a due diligence checklist and who needs one?
Due diligence is the period after an investor shows serious interest, when they check your records against what you told them. A preparation checklist lists the documents founders typically gather so nothing is hunted for at the last minute.
Any founder raising a priced round needs one, and many founders raising on simple agreements benefit from starting early. The list is also useful before an acquisition conversation, a large customer security review or a new board member joining.
When should you start preparing?
Start about a month before you begin investor meetings. Most of the work is finding signed versions of documents that already exist, and that takes longer than founders expect. A clear trigger is the first serious follow-up from an investor asking for more detail.
How to fill in the due diligence checklist, step by step
01Gather corporate records
Collect incorporation documents, board and shareholder approvals, financing documents and a reconciled cap table. Use the signed final versions.
02Assemble the financial record
Add historical financial statements, recent monthly figures, your financial model with its assumptions, and tax filings. Note who prepared each one.
03Compile commercial proof
List customers with contract values, your largest signed contracts, retention figures and pipeline. Make sure every figure matches your deck.
04Document product and intellectual property
Add a product roadmap, an architecture overview, security policies and signed invention assignments from everyone who has built the product.
05Prepare people and compliance details
Include an org chart, employment and contractor agreements, equity grant records and any open disputes. Mark each item complete, in progress or not applicable.
What does a filled-in checklist look like?
1. CORPORATE [x] Incorporation documents [x] Board approvals [x] Cap table reconciled to signed grants 2. FINANCIAL [x] Monthly figures, last 12 months [x] Model with assumptions tab [ ] Prior-year tax filing (accountant, due 14 June) 3. COMMERCIAL [x] Customer list with contract values [x] Top 5 contracts [x] Retention by quarter 4. PRODUCT [x] Architecture overview [x] Security policy [ ] Invention assignment for one early contractor (requested) 5. PEOPLE [x] Org chart [x] Offer letters [n/a] Disputes: none
The company and every detail above are invented. The two open items show how to record an owner and a date so nothing is left vague.
Common preparation mistakes
Starting after the term sheet
Gathering records under a deadline slows the process and can make simple gaps look like bigger problems.
Numbers that disagree
If revenue in the model differs from the deck, investors will ask why. Reconcile every figure before you share anything.
Missing signatures
Drafts and unsigned copies create follow-up questions. Store the executed version of every agreement.
Leaving items blank
Mark each line complete, in progress with a date, or not applicable with a reason.
Due diligence checklist questions
What do investors usually look at during due diligence?
Investors commonly review corporate records, the cap table, financial statements and model, customer contracts and retention, product and security documents, and team agreements. The exact scope varies by investor and round.
How long does startup due diligence take?
It varies widely by round size and how organized your records are. Founders who prepare their documents in advance usually spend less time answering follow-up requests.
Is this checklist a legal review?
No. It is a preparation list of documents founders typically gather. Ask your lawyer and accountant which items apply to your company and whether anything needs fixing.
What is the difference between a due diligence checklist and a data room?
The checklist is the list of what to gather. The data room is the organized, shared folder where those documents live for investors to review.