If you’ve gone through startup fundraising, you’ve gone through through ringer. You already know this process SUCKS.
The truth is that the more buttoned up you are, the easier fundraising should be.
We made this VC checklist guide to help founders do exactly that.
Below is a standard venture capital due diligence checklist. This runs through all the pieces of information you’ll need to have ready once you sign a term sheet. Not all investors will ask for all of this information, but our opinion is that you’re better safe than sorry. Having all of this together in one place (in a data room) will save you months of time when it comes time to fundraise.
Here is our guide to what founders should include in a venture capital data room.
Most VC due diligence checklists cover the following areas.
Each of these should be a separate folder in your data room. If you are using Notion the most popular hosting tool for startup data rooms), we recommend making each of these section their own separate page so you can embed documents within them.
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Financial information is needed when evaluating any investment opportunity. The amount of financial information available and necessary will differ based on the stage of the company.
Earlier stage companies (pre-seed and seed) will focus less on financial info and more on narrative mainly because of the lack of financial data. As a company grows, the more emphasis is placed on financials, and growth equity investing requires a larger emphasis on historical financials.
Here are 14 financial items that we have seen as part of VC diligence.
Recommended financial tools: Brex, Stripe, Gusto, Quickbooks, Google Sheets
Different funds will have different questions surrounding tax. From our experience, this isn’t a huge part of the diligence process since most of these documents will not be available for early-stage companies.
Here are five documents that we’ve seen from funds that ask tax-related questions in diligence.
Recommended tax tools: Stripe, Gusto, Quickbooks
Legal is one of the more important parts of the diligence process. This section should help investors uncover if there are any landmines waiting that they should be aware of before investing.
Here are 12 items you should have handy during the legal section of the diligence checklist.
Recommended legal / incorporation tools: Firstbase, Stripe Atlas
This section of diligence is meant to cover questions about employees, management structure, and benefits. Having a clean HR process in place gives investors comfort that the company is being thoughtful with their hiring and scaling plans.
Here are ten items we’ve seen included in HR sections of the diligence process.
Recommended HR tools: Gusto
This section is meant to cover all IT-related questions about the business. That includes the current tech stack, licenses owned by the company, and data security practices.
Here are six items you will want covered in this section of diligence.
Recommended software tools: Our top-rated software tools we use to power our business
This section covers in detail the different offers the company provides to the market. Good investors will want to know about current and future products and features, unit economics on different products, and market share of each.
Here are seven items we’ve seen in the products and services section of venture capital due diligence.
This section should cover everything related to marketing and sales for the company. That includes marketing plans, acquisition funnels, and how much it costs to bring in new business.
Here are ten things we’ve seen in this section of the diligence checklist.
Recommended marketing / sales tools: Hubspot, beehiiv, ActiveCampaign
This section gives more information on who the company competes against. If you don’t think you have any competitors, you’re wrong.
The better you can lay out the competitive landscape and how you differentiate, the better you can tie the story together with investors.
Here are four things your competition section should include.
Especially in early-stage seed and pre-seed investing, team makeups play a huge part of the diligence process.
There are so many gaps in other places (no metrics, little product data, low awareness) that investors are early-stage VCs are essentially betting on the founding team. The more background you can provide on why your team is the right team to lead the business, the better off you are.
Here are six items we recommend including in this section.
There you have it.
If you’re able to answer these questions, you’re on the right path.
Raising capital is never easy, and good investors will want to leave no stone unturned. Hopefully this venture capital due diligence checklist will help your business wow new investors and make it easier for you to raise some funds.