Due Diligence Preparation Kit

DD PHILOSOPHY

Due Diligence Fundamentals

DUE DILIGENCE PHILOSOPHY

WHY DD PREPARATION MATTERS:
☐ DD is where deals die
☐ Speed of DD = speed to close
☐ Surprises kill trust
☐ Preparation shows competence
☐ Organization impresses investors
☐ Clean DD = better terms

DD PRINCIPLES:

1. NO SURPRISES
   ☐ Disclose issues early
   ☐ Don't let them find problems
   ☐ Context is everything
   ☐ Honest is always better

2. BE READY BEFORE TERM SHEET
   ☐ Data room should exist
   ☐ Documents organized
   ☐ Answers prepared
   ☐ Don't scramble

3. RESPOND FAST
   ☐ Same-day response target
   ☐ 24-48 hour max
   ☐ Speed shows execution
   ☐ Delays raise concerns

4. QUALITY OVER QUANTITY
   ☐ Right documents, organized
   ☐ Don't bury them in paper
   ☐ Clear naming conventions
   ☐ Easy to navigate

DD TIMELINE:
| Phase | Duration | Risk if Delayed |
|-------|----------|-----------------|
| Term sheet to DD start | 1-2 days | Low |
| Data room access | 1 week | Medium |
| Initial DD questions | 1-2 weeks | Medium |
| Reference calls | 1-2 weeks | High |
| Legal DD | 2-3 weeks | High |
| Final issues | 1-2 weeks | Critical |

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COMPREHENSIVE DD CHECKLIST

Complete Due Diligence Document List

COMPLETE DD DOCUMENT CHECKLIST

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CORPORATE DOCUMENTS
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Formation:
☐ Certificate of Incorporation (original + amendments)
☐ Bylaws (current version)
☐ Certificate of Good Standing (Delaware + others)
☐ Qualifications to do business (other states)

Governance:
☐ Board meeting minutes (all)
☐ Shareholder meeting minutes (all)
☐ Written consents (all)
☐ Current board composition
☐ Committee charters (if any)

Cap Table & Equity:
☐ Cap table (fully diluted, current)
☐ Cap table (historical)
☐ Stock ledger
☐ Stock option plan
☐ Option grant register
☐ 83(b) elections (founders)
☐ Exercise history

Prior Financings:
☐ Term sheets (all rounds)
☐ Stock Purchase Agreements (all)
☐ Voting Agreement
☐ Right of First Refusal Agreement
☐ Investors' Rights Agreement
☐ Side letters
☐ SAFE/convertible notes

═══════════════════════════════════════
FINANCIAL DOCUMENTS
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Historical Financials:
☐ P&L statements (monthly, 3 years)
☐ Balance sheets (monthly, 3 years)
☐ Cash flow statements (monthly)
☐ Audited financials (if available)

Current Period:
☐ YTD P&L
☐ Current balance sheet
☐ Bank statements (12 months)
☐ AR aging report
☐ AP aging report
☐ Cash position detail

Projections:
☐ Financial model (detailed)
☐ Annual budget
☐ Monthly forecast
☐ Key assumptions document

Tax & Valuation:
☐ Tax returns (3 years)
☐ 409A valuation (most recent)
☐ R&D credit studies (if any)

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CUSTOMER & REVENUE
═══════════════════════════════════════

Customer Data:
☐ Customer list (with ARR/ACV)
☐ Revenue by customer
☐ Customer concentration analysis
☐ Customer contracts (top 10-20)
☐ Contract template

Metrics:
☐ MRR/ARR history
☐ Cohort analysis
☐ Churn analysis (logo + revenue)
☐ NRR/GRR trends
☐ NPS scores

Sales:
☐ Pipeline report
☐ Win/loss analysis
☐ Sales cycle data
☐ CAC/LTV analysis

═══════════════════════════════════════
TEAM & HR
═══════════════════════════════════════

Organization:
☐ Org chart
☐ Headcount history
☐ Key employee list

Agreements:
☐ Executive employment agreements
☐ Standard employment agreement template
☐ Contractor agreements
☐ Founder agreements
☐ Non-compete/non-solicit agreements
☐ Invention assignment agreements

Compensation:
☐ Executive compensation summary
☐ Salary bands
☐ Bonus structures
☐ Commission plans

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LEGAL & IP
═══════════════════════════════════════

Intellectual Property:
☐ Patent applications/grants
☐ Trademark registrations
☐ Copyright registrations
☐ IP assignment agreements (all)
☐ Domain registrations
☐ Open source usage summary

Contracts:
☐ Material contracts (>$50K)
☐ Partnership agreements
☐ Vendor contracts
☐ Lease agreements

Litigation & Compliance:
☐ Pending litigation summary
☐ Threatened claims
☐ Regulatory matters
☐ Insurance policies

Privacy & Security:
☐ Privacy policy
☐ Terms of service
☐ SOC 2 report
☐ Security questionnaire
☐ GDPR/CCPA compliance

DD Question Preparation

COMMON DD QUESTIONS & ANSWERS

REVENUE QUESTIONS:
☐ How do you recognize revenue?
  Answer: _______________________________________________
☐ What's your billing cycle?
  Answer: _______________________________________________
☐ Any deferred revenue? How much?
  Answer: _______________________________________________
☐ Revenue concentration risk?
  Answer: _______________________________________________

CHURN QUESTIONS:
☐ Why do customers leave?
  Answer: _______________________________________________
☐ What's your churn by cohort?
  Answer: _______________________________________________
☐ How do you save at-risk customers?
  Answer: _______________________________________________
☐ Any large customer at risk?
  Answer: _______________________________________________

TEAM QUESTIONS:
☐ Key person risk?
  Answer: _______________________________________________
☐ Founder vesting status?
  Answer: _______________________________________________
☐ Any pending departures?
  Answer: _______________________________________________
☐ Any employment issues?
  Answer: _______________________________________________

LEGAL QUESTIONS:
☐ Any litigation (current or threatened)?
  Answer: _______________________________________________
☐ Any IP disputes?
  Answer: _______________________________________________
☐ Regulatory concerns?
  Answer: _______________________________________________
☐ Any material contract issues?
  Answer: _______________________________________________

TECHNOLOGY QUESTIONS:
☐ Security practices?
  Answer: _______________________________________________
☐ Data breaches (any historical)?
  Answer: _______________________________________________
☐ Open source usage?
  Answer: _______________________________________________
☐ Technical debt?
  Answer: _______________________________________________

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REFERENCE MANAGEMENT

Reference Preparation Framework

REFERENCE PREPARATION

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CUSTOMER REFERENCES (Prepare 5-8)
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Reference 1:
Company: _______________________________________________
Contact: _______________________________________________
Title: _______________________________________________
Email: _______________________________________________
Phone: _______________________________________________
Relationship strength: ☐ Strong ☐ Good ☐ Moderate
Key story: _______________________________________________
Pre-briefed: ☐ Yes ☐ No
Available dates: _______________________________________________

Reference 2:
Company: _______________________________________________
Contact: _______________________________________________
Title: _______________________________________________
Email: _______________________________________________
Phone: _______________________________________________
Relationship strength: ☐ Strong ☐ Good ☐ Moderate
Key story: _______________________________________________
Pre-briefed: ☐ Yes ☐ No
Available dates: _______________________________________________

[Continue for 3-6 more references]

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EXECUTIVE/TEAM REFERENCES
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For CEO/Founder:
Reference 1: _______________________________________________
Relationship: _______________________________________________
Contact: _______________________________________________
Pre-briefed: ☐ Yes ☐ No

Reference 2: _______________________________________________
Relationship: _______________________________________________
Contact: _______________________________________________
Pre-briefed: ☐ Yes ☐ No

For CTO/Technical:
Reference 1: _______________________________________________
Relationship: _______________________________________________
Contact: _______________________________________________
Pre-briefed: ☐ Yes ☐ No

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INVESTOR REFERENCES
═══════════════════════════════════════

Prior/Current Investor:
Name: _______________________________________________
Firm: _______________________________________________
Contact: _______________________________________________
Pre-briefed: ☐ Yes ☐ No

Board Member:
Name: _______________________________________________
Contact: _______________________________________________
Pre-briefed: ☐ Yes ☐ No

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REFERENCE BRIEFING
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Brief each reference on:
☐ Who will be calling
☐ What they're evaluating
☐ Key points to emphasize
☐ Timing expectations
☐ Thank them in advance

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