An investor meeting tests whether your startup is interesting.
Due diligence tests whether the story is accurate.
Once an investor becomes seriously interested, they will examine your ownership, finances, customers, technology, contracts, team, and legal position. The purpose is not simply to find faults. It is to confirm the information presented during fundraising, identify material risks, and understand whether the company is ready to receive investment.
A missing document will not always end a deal. Unexplained inconsistencies, undisclosed risks, or unclear ownership can.
Here is what founders should prepare.
1. Company and Corporate Records
Investors first need to confirm that the company legally exists, is properly governed, and has the authority to issue new shares.
Prepare:
- Incorporation documents
- Current articles, bylaws, or constitution
- Company registration records
- Board and shareholder resolutions
- Details of directors and officers
- Documents for subsidiaries
- Required business licenses
Investors may ask:
Has every previous share issuance been properly approved?
Are there subsidiaries, related companies, or founder-owned entities connected to the business?
Are any corporate records missing or outdated?
Your legal records should agree with your cap table and previous financing documents.
2. Cap Table and Previous Funding
Investors need to understand exactly who owns the company before calculating what they will own after the round.
Your ownership records should include:
- Current cap table
- Fully diluted cap table
- Founder shares
- Employee options
- Adviser equity
- SAFEs
- Convertible notes
- Warrants
- Previous investment agreements
- Shareholder rights
- Post-round dilution model
Example
Your cap table may show that founders own 72% of the company.
However, after outstanding SAFEs convert and the employee option pool is increased, founder ownership may fall to 58% before the new investment is completed.
Investors will model the complete ownership position, not only the percentages shown in your current spreadsheet.
Every entry in the cap table should be supported by signed legal documents.
You can internally link this section to:
Building a Strong Cap Table: A Guide to Your Startup’s Ownership Structure
3. Financial Performance and Tax
Investors will compare your financial records with the numbers presented in the pitch deck.
They may request:
- Historical profit-and-loss statements
- Balance sheets
- Cash-flow records
- Monthly revenue history
- Current management accounts
- Budget versus actual results
- Financial model
- Cash-flow forecast
- Burn rate and runway
- Debt obligations
- Tax returns and filings
- Outstanding tax liabilities
The main question is whether the company’s financial story is consistent.
Example
Your pitch deck states:
The company generates $65,000 in monthly recurring revenue.
But your accounting records show $52,000 of subscription revenue and $13,000 of one-time implementation fees.
The total revenue may be correct, but describing all of it as recurring revenue would be misleading.
Investors may also test whether your growth forecast is supported by customer acquisition, hiring, pricing, and cost assumptions.
For more detail, link to:
Financial Model Check: Will Your Numbers Hold Up in an Investor Meeting?
4. Customers, Revenue, and Commercial Traction
Investors want evidence that customers genuinely use and pay for the product.
Prepare:
- Customer list or anonymised summary
- Revenue by customer
- Customer contracts
- Retention and churn
- Pricing
- Sales pipeline
- Pilot agreements
- Letters of intent
- Customer concentration
- Case studies
- Sales and marketing metrics
Investors may ask:
How much revenue comes from your largest customer?
How many customers are on discounted or trial contracts?
What percentage of the pipeline is genuinely qualified?
Why do customers leave?
Are reported partnerships generating revenue?
Example
A startup reports $1 million in annual revenue, but one customer represents $620,000.
The revenue is real, but the investor will recognise significant customer-concentration risk.
Be precise about the difference between:
- Signed and projected revenue
- Paid and unpaid pilots
- Registered and active users
- Letters of intent and binding contracts
- Pipeline value and contracted value
Investors may contact selected customers during later diligence. Obtain the customer’s permission before arranging references.
5. Product and Technology
The level of technical diligence depends on your company.
A typical software startup may need to provide:
- Product overview
- Current demo
- Product roadmap
- Technical architecture
- Development status
- Key integrations
- Infrastructure dependencies
- Scalability information
- Known product limitations
Investors may ask:
Is the product fully developed or partly manual behind the scenes?
How dependent is the business on one platform or service provider?
Can the infrastructure support the forecast customer growth?
What still needs to be built after the round?
Do not describe a prototype as a complete commercial product. Investors are usually more comfortable with an honest roadmap than an exaggerated claim.
For AI companies, diligence may also cover training-data rights, third-party models, open-source components, privacy, model reliability, and whether AI is central to the product or simply an external service wrapped in a new interface. AI-related warranties and diligence expectations have become more prominent in current venture financing documentation.
6. Intellectual Property and Security
Investors need to confirm that the company owns the technology, brand, and other assets on which its value depends.
Prepare:
- Founder IP-assignment agreements
- Employee IP-assignment agreements
- Contractor IP assignments
- Patents and applications
- Trademarks
- Software licences
- Open-source software records
- Privacy policies
- Data-processing agreements
- Cybersecurity policies
- Details of previous security incidents
A common issue occurs when an external developer created part of the product but never transferred the intellectual property to the company.
Example
A freelancer built the original platform and was paid in full, but the contract did not include an IP-assignment clause.
Payment alone may not prove that the startup owns all rights to the work. This should be reviewed and corrected before serious investor diligence.
Investors may reconsider a deal when the company cannot demonstrate ownership of its most important technology or content.
7. Team and Employment
Investors are evaluating both the company and the people expected to build it.
Prepare:
- Founder agreements
- Founder vesting terms
- Employee contracts
- Contractor agreements
- Adviser agreements
- Option grants
- Compensation information
- Organization chart
- Hiring plan
- Confidentiality and IP provisions
Investors may ask:
Are all founders working full time?
What happens if a founder leaves?
Are important employees properly contracted?
Have all employees and contractors assigned their work to the company?
Which important capability is still missing?
The hiring plan should also match the financial model. If the model includes 12 new employees, the company should be able to explain the roles, timing, and cost.
8. Material Contracts and Legal Risks
Investors will review agreements that could materially affect the company.
These may include:
- Major customer contracts
- Supplier agreements
- Distribution partnerships
- Technology licences
- Debt agreements
- Leases
- Exclusivity arrangements
- Insurance policies
- Regulatory approvals
- Current or threatened disputes
They may focus on clauses related to:
- Termination
- Renewal
- Exclusivity
- Liability
- Intellectual property
- Change of control
- Minimum commitments
- Data protection
Example
A distribution agreement may generate 40% of company revenue but allow the partner to terminate with 30 days’ notice.
That does not automatically make the company uninvestable, but the investor will consider the revenue less secure.
Disclose current disputes and legal risks clearly. Investors are usually more concerned by a hidden problem than by a known issue with a credible solution.
9. Market and Competitive Position
Due diligence is not limited to documents.
Investors may independently test your market claims, speak with customers, research competitors, and challenge your assumptions.
Be ready to explain:
- Your initial target market
- Customer purchasing behavior
- Market growth
- Competitor positioning
- Alternative solutions
- Barriers to entry
- Expansion opportunities
- Regulatory or market risks
Example
A pitch deck says:
We have no competitors.
During research, the investor finds four direct competitors and several established alternatives.
The issue is no longer only competition. It is whether the founders understand their market.
A better position is:
Customers currently use spreadsheets and two legacy platforms. We compete through faster implementation, specialised workflows, and direct integrations with the systems they already use.
10. Fundraising Ask and Use of Funds
Investors will test whether your fundraising amount is connected to a credible operating plan.
Prepare:
- Amount being raised
- Proposed financing instrument
- Current round status
- Use of funds
- Runway calculation
- Key hiring plan
- Product milestones
- Commercial milestones
- Downside scenario
- Expected position before the next round
Weak explanation
We are raising $2 million for product, marketing, and operations.
Stronger explanation
We are raising $2 million to complete the enterprise product, hire four commercial team members, and grow annual recurring revenue from $600,000 to $2.1 million over approximately 18 months.
The second explanation allows investors to assess whether the amount is sufficient and whether the milestones are realistic.
11. Founder and Reference Checks
Investors may conduct reference checks on founders, particularly before leading a significant round.
They may speak with:
- Former colleagues
- Previous investors
- Customers
- Employees
- Industry contacts
- Other founders
They may evaluate:
- Integrity
- Leadership
- Ability to recruit
- Financial discipline
- Response to setbacks
- Communication
- Reputation
Do not assume reference checks will be limited to the people you nominate.
Be prepared to explain previous startups, founder departures, failed fundraising attempts, business disputes, or other issues that may appear during the process.
12. What Happens When Investors Find a Problem?
Due diligence does not require a perfect company.
Most early-stage startups have incomplete processes, customer concentration, team gaps, uncertain forecasts, or legal work that needs improvement.
When investors identify a material issue, they may:
- Ask the company to correct it before closing
- Change the valuation
- Modify the term sheet
- Add investor protections
- Hold back part of the investment
- Extend the diligence period
- Withdraw from the deal
The founder’s response matters.
A useful response explains:
- What happened
- Why it happened
- Its potential impact
- What has already been corrected
- What remains to be completed
- Who is responsible
- When it will be resolved
Avoid becoming defensive or trying to hide an issue likely to be discovered later.
The Startup Due Diligence Checklist
| Area | What Investors Will Confirm |
|---|---|
| Company | The business is legally established and properly governed |
| Ownership | The cap table and previous securities are accurate |
| Financials | Historical results and forecasts are credible |
| Customers | Revenue, retention, contracts, and pipeline are genuine |
| Product | The technology works and the roadmap is realistic |
| Intellectual Property | The company owns the assets it depends on |
| Security | Customer data and systems are appropriately protected |
| Team | Founders, employees, and contractors are properly documented |
| Legal | Material agreements and risks are disclosed |
| Market | Market and competition claims can withstand independent research |
| Fundraising | The round amount is connected to runway and milestones |
| Founders | The leadership team can execute and is trustworthy |
How to Prepare Before Due Diligence Begins
Do not wait until an investor sends a request list.
Before launching outreach:
- Check that the pitch deck and financial model match
- Reconcile the cap table with signed agreements
- Confirm that the company owns its intellectual property
- Update financial and customer metrics
- Organise material contracts
- Identify unresolved legal or tax issues
- Build a structured investor data room
- Decide which sensitive documents will be shared later
A sample venture-capital request list can be used to organise corporate and legal records before an investor begins formal review.
For the full document structure and sharing timeline, link to:
How to Build an Investor Data Room That Speeds Up Fundraising
Due Diligence Should Confirm Your Story, Not Rewrite It
A well-prepared startup does not use diligence to introduce a different version of the business.
The pitch deck, financial model, cap table, customer evidence, legal records, and fundraising plan should all support the same story.
At GetPitchRaise, we support early-stage founders through:
- Pitch Deck and Financial Model Assessment
- Fundraising Material Development
- Investor Outreach
Is Your Startup Ready for Investor Due Diligence?
Book a free consultation call now to review your fundraising materials and prepare for investor outreach.