Due diligence is the investor's check that what you told them is true. After the pitch and the term sheet, they look at your documents, numbers and ownership to confirm there are no surprises. At pre-seed and seed it is lighter than in later rounds, but it can still delay or even stop a deal.
The good news: almost everything investors check is something you can prepare in advance. Use this checklist to build your data room before you start fundraising, not after you sign.
What Investors Are Really Checking
Due diligence answers four questions:
- Does the company own what it says it owns? Shares, code, brand and customer contracts.
- Is the cap table right? Who owns what, including SAFEs, notes and options.
- Are the numbers real? Revenue, users, pipeline and burn, traced back to source data.
- Are there hidden risks? Disputes, unpaid taxes, regulatory issues or key-person problems.
At early stage, most problems come from the first two. A missing signature on a founder agreement or code written by a freelancer who never assigned the IP can hold up closing for weeks.
The Due Diligence Checklist
1. Company and legal
- Certificate of incorporation and current articles or charter
- Shareholder agreement and board minutes or written resolutions
- Register of shareholders and directors
- Any previous funding documents: SAFEs, convertible notes, side letters
- Licences or permits your business needs to operate
- A short note on any past or pending disputes (or confirmation there are none)
2. Ownership and cap table
- An up-to-date, fully diluted cap table that matches the signed documents
- Founder share agreements with vesting and a cliff
- Option pool approval and every option grant, signed
- A model of how outstanding SAFEs convert in this round (try the equity dilution calculator)
- No verbal equity promises: anything you have promised someone should be written down or resolved
3. Intellectual property
- IP assignment agreements from every founder, employee and contractor who built product
- List of domains, trademarks and any patents, registered to the company
- Open-source licences used in your code, with nothing that forces you to publish it
- Confirmation that no founder's former employer has a claim on the work
4. Financials
- Monthly profit and loss and bank statements for the last 12 months (or since founding)
- Current cash, monthly burn rate and runway
- A financial model with the assumptions written down
- Tax registrations and filings, with nothing overdue
- Debts, loans and grants, including any repayment conditions
5. Customers and traction
- Key customer and pilot contracts, including terms and renewal dates
- Metrics with source: revenue by month, active users, retention, pipeline
- Customer references investors can call, agreed with those customers in advance
- Evidence behind your market size, such as your TAM, SAM and SOM workings
6. Product and technology
- Product demo or test access
- Short architecture overview and where data is hosted
- Privacy policy, data protection basics and how personal data is handled
- Security practices: access control, backups, any incidents
7. Team
- Employment contracts and contractor agreements
- Founder CVs and references
- Hiring plan tied to what the round will fund
- Any non-compete or non-solicit obligations a founder still has
How to Build a Simple Data Room
A data room is just an organised, shared folder. At seed, a cloud drive with clear folders and view-only access is enough.
- Mirror the checklist. One folder per section above, numbered so the order is obvious.
- Name files clearly. "2026-03 Founder Share Agreement - Anna (signed).pdf" beats "scan_004.pdf".
- Add an index. One page listing every document and where to find it.
- Share in stages. Give the deck and key metrics early; open contracts and financials after a term sheet.
- Keep it current. Update the cap table and metrics every month, not only during a raise.
Common Red Flags (and How to Fix Them Early)
| Red flag | Why it worries investors | Fix before you raise |
|---|---|---|
| Founder agreements not signed | Ownership is unclear if someone leaves | Sign them now, with vesting |
| Code built by contractors without IP assignment | The company may not own its product | Get signed assignments, even retroactively |
| Cap table does not match paperwork | Investors cannot tell who owns what | Reconcile every grant and SAFE |
| Metrics cannot be traced to data | Traction may be overstated | Export source data and keep definitions consistent |
| Many small investors with special rights | Next rounds get complicated | Standardise terms and limit side letters |
How Long Does It Take?
At pre-seed and seed, due diligence typically takes one to four weeks. Most of the delay comes from founders collecting documents after the term sheet. With a ready data room, the investor's lawyers can move straight to the final documents.
Prepare Before Investors Ask
Diligence checks what is behind your pitch, so the best preparation starts with the pitch itself. Make sure your pitch deck states only what you can back up, and practise the questions investors ask. To see which claims an investor would question first, run your deck through the free Readiness Score.
This checklist is a practical guide and not legal or financial advice. Ask a startup lawyer to review your documents before you raise.