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Get ready for the due diligence process before closing a funding round. Learn what documents investors request and how to organize your data room.
Due diligence typically happens after a term sheet. Investors verify your claims, review legal documents, check financials, and assess risks. The process takes 2-6 weeks depending on round size.
Create an organized virtual data room (Google Drive or Notion works early). Standard folders: Corporate Documents, Financials, Cap Table, Contracts, IP, Team, and Product. Keep it updated.
Gather: certificate of incorporation, bylaws, board minutes, cap table, stock option agreements, founder agreements, and any previous funding documents. Everything should be signed and dated.
Prepare: historical financials, bank statements, current burn rate and runway, financial projections with assumptions, and unit economics. Be ready to explain variances and projections.
Include: IP assignment agreements from all founders and employees, patents or trademarks if any, technology overview, and product roadmap. Ensure the company owns all IP created for it.
Prepare explanations for: any unusual cap table entries, founder departures, legal disputes, customer concentration, and competitive threats. Transparency builds trust; surprises kill deals.
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