The Due Diligence Process

After you sign a term sheet, the funds are not wired immediately. The investor has 30-45 days of exclusivity to verify your claims. This is Due Diligence.

Categories of Diligence

• Legal: Verifying incorporation, IP assignment (did all contractors sign over their code?), employment agreements, and reviewing previous SAFE notes or cap table data.
• Financial: Reviewing bank statements, P&L, tax returns, and verifying revenue claims and customer churn data.
• Technical: Reviewing architecture, code quality, open-source licenses, and scalability. (More common in Series A+).
• Commercial / Customer: Calling your existing customers to ask if they actually use and like the product.

The Data Room

You should have a secure folder (e.g., DocSend, Google Drive) prepared before you start pitching. If an investor asks for diligence materials and you take 2 weeks to produce them, it kills momentum and signals disorganization.