So you’ve built a product. Maybe even got a pitch deck and early traction. But when the term sheet feels close, here comes the real test: Due Diligence.
This is where many deals fall apart — not because the idea isn’t good, but because the backend isn’t ready.
In this edition, I’ll break down exactly what investors and VCs look at before wiring funds — and how you can be prepared.
📋 What is Due Diligence (DD)?
DD is the investor’s way of asking: “Can I trust this founder… and these numbers?”
It’s a structured review of your financial, legal, and business health before making an investment.
🔍 What Investors Check – A Startup DD Checklist
1. Financials & Books of Accounts
- Monthly Profit & Loss for last 12–24 months
- Cash flow statements
- Bank statements
- GST, TDS, and tax filings
- Reconciliations with invoices
🧠 Tip: Keep them clean, up-to-date, and match numbers from your pitch deck.
2. Cap Table & Shareholding Structure
- Updated cap table with founder and investor stakes
- Details of ESOP pool (if any)
- Any convertible notes or SAFE agreements
🧠 Tip: A messy cap table is a red flag. Keep it clean and documented.
3. Customer Contracts & Revenue Proof
- Sample invoices
- Customer agreements (if B2B)
- Payment terms and collection cycles
🧠 Tip: Early-stage investors may sample-test these. Be transparent.
4. Legal Docs & Registrations
- Incorporation certificate
- GST, PAN, TAN
- Founders’ agreements
- IP/trademark documents (if relevant)
🧠 Tip: Keep a digital folder ready — delays here create investor doubts.
5. Compliance & Regulatory Filings
- ROC filings (Form AOC-4, MGT-7 etc.)
- Board resolutions
- Notices from authorities (if any)
🧠 Tip: Partner with a CA (like me 😄) to maintain these proactively.
🎯 Final Thought
Fundraising doesn’t end with the pitch deck. It closes when the numbers, documents, and structure hold up under due diligence.
As a Chartered Accountant and Virtual CFO, I help startups get funding-ready — not just with pitch decks, but with clean financials and structured compliance.
📩 Want me to review your current numbers or help build a model, feel free to reach out at 📧 office@cfoemeritus.com
PS: Next week, I’m breaking down the “Top Startup Ratios Every Founder Should Track” — made simple.
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