Due Diligence Response Kit

DUE DILIGENCE PHILOSOPHY

Understanding DD as Value Demonstration

DUE DILIGENCE FUNDAMENTALS

WHAT DD ACTUALLY IS:
☐ Verification of everything you claimed
☐ Risk identification for the buyer/investor
☐ Foundation for deal terms and pricing
☐ Test of your organization's readiness
☐ Preview of what an acquirer would see

CEO'S ROLE IN DD:
☐ Set expectation of DD-readiness culture
☐ Ensure corporate records are maintained
☐ Own the DD process and narrative
☐ Engage appropriately on key questions
☐ Keep team focused while DD runs

DD TYPES:
☐ Investor DD (fundraising)
☐ M&A DD (acquisition)
☐ Customer DD (enterprise deals)
☐ Partner DD (strategic partnerships)
☐ Insurance DD (underwriting)

COMMON DD FAILURES:
☐ Documents don't exist or can't be found
☐ Records are incomplete or contradictory
☐ Skeletons discovered by other side
☐ Team unprepared for questions
☐ Process takes too long, deal dies

THE DD MINDSET SHIFT:
"Due diligence isn't something that happens
to you—it's something you prepare for
continuously. A DD-ready company is a
well-run company. Start building your data
room before you need it."

DD READINESS LEVELS:
Level 1: Scramble (nothing organized)
Level 2: Reactive (find docs when asked)
Level 3: Prepared (data room ready)
Level 4: Proactive (always current)
Level 5: Exemplary (impressive presentation)

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COMPREHENSIVE DD PREPARATION

Due Diligence Response Framework

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DUE DILIGENCE RESPONSE KIT
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COMPANY: _______________
DD Type: ☐ Investor ☐ M&A ☐ Customer ☐ Other
Counterparty: _______________
Target Close: _______________
DD Lead: _______________

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SECTION 1: DATA ROOM ORGANIZATION
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DATA ROOM STRUCTURE:

1. CORPORATE
   1.1 Formation Documents
   1.2 Governance Documents
   1.3 Stockholder Agreements
   1.4 Board Materials
   1.5 Stockholder Materials

2. FINANCIAL
   2.1 Financial Statements
   2.2 Tax Returns
   2.3 Budget/Forecasts
   2.4 Accounting Policies
   2.5 Audit Materials

3. EQUITY
   3.1 Cap Table
   3.2 Stock Ledger
   3.3 Option Plans/Grants
   3.4 409A Valuations
   3.5 Securities Filings

4. INTELLECTUAL PROPERTY
   4.1 Patents
   4.2 Trademarks
   4.3 Copyrights
   4.4 IP Assignments
   4.5 IP Agreements

5. COMMERCIAL
   5.1 Customer Contracts
   5.2 Customer List/Revenue
   5.3 Vendor Contracts
   5.4 Partnership Agreements
   5.5 Standard Terms

6. EMPLOYMENT
   6.1 Employee Census
   6.2 Organization Chart
   6.3 Employment Agreements
   6.4 Compensation Information
   6.5 Benefits Information
   6.6 Contractor Agreements

7. LEGAL
   7.1 Litigation History
   7.2 Regulatory Matters
   7.3 Insurance Policies
   7.4 Compliance Materials

8. PRODUCT/TECHNOLOGY
   8.1 Product Documentation
   8.2 Technology Architecture
   8.3 Security Certifications
   8.4 Development Roadmap

DATA ROOM SETUP:
Platform: ☐ Dropbox ☐ Box ☐ Google Drive
          ☐ DocSend ☐ Firmex ☐ Other: _____
Access control: ☐ View only ☐ Download ☐ Print
Watermarking: ☐ Enabled ☐ Disabled
Activity tracking: ☐ Enabled ☐ Disabled

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SECTION 2: DOCUMENT CHECKLIST
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CORPORATE DOCUMENTS:

Formation:
☐ Certificate of Incorporation (original)
☐ All Amendments to Certificate
☐ Certificate of Designation (preferred)
☐ Good Standing Certificate (recent)
☐ Bylaws (current)
☐ All Amendments to Bylaws
Status: ___ of ___ ready

Governance:
☐ Board meeting minutes (3 years)
☐ Board written consents (3 years)
☐ Stockholder meeting minutes (3 years)
☐ Stockholder written consents (3 years)
☐ Committee minutes (if any)
Status: ___ of ___ ready

Stockholder Agreements:
☐ Stockholders Agreement
☐ Investor Rights Agreement
☐ Voting Agreement
☐ ROFR/Co-Sale Agreement
☐ All amendments to above
Status: ___ of ___ ready

FINANCIAL DOCUMENTS:

Statements:
☐ Audited financials (if available)
☐ Monthly P&L (24 months)
☐ Monthly balance sheet (24 months)
☐ Cash flow statements
☐ AR aging report
☐ AP aging report
Status: ___ of ___ ready

Tax:
☐ Federal tax returns (3 years)
☐ State tax returns (3 years)
☐ Tax correspondence
☐ R&D credit studies
Status: ___ of ___ ready

Forecasts:
☐ Annual budget (current year)
☐ Multi-year projections
☐ Unit economics
☐ Assumptions documentation
Status: ___ of ___ ready

EQUITY DOCUMENTS:

Cap Table:
☐ Fully diluted cap table
☐ Ownership by holder
☐ Waterfall analysis
☐ Option pool summary
Status: ___ of ___ ready

Stock:
☐ Stock ledger (complete)
☐ Stock certificate copies
☐ Stock purchase agreements
☐ 83(b) elections on file
Status: ___ of ___ ready

Options:
☐ Equity incentive plan(s)
☐ Option grant agreements
☐ Option exercise agreements
☐ 409A valuations (all)
Status: ___ of ___ ready

INTELLECTUAL PROPERTY:

☐ Patent schedule (all filings)
☐ Patent assignments
☐ Trademark registrations
☐ Trademark assignments
☐ Copyright registrations
☐ IP assignments (employees)
☐ IP assignments (contractors)
☐ Technology licenses (in)
☐ Technology licenses (out)
☐ Open source inventory
Status: ___ of ___ ready

COMMERCIAL CONTRACTS:

Customers:
☐ Top 10 customer contracts
☐ Customer list with revenue
☐ Customer concentration analysis
☐ Standard customer agreement
☐ Renewal/churn data
Status: ___ of ___ ready

Vendors:
☐ Material vendor contracts
☐ Technology/software agreements
☐ Lease agreements
☐ Service agreements
Status: ___ of ___ ready

EMPLOYMENT:

☐ Employee census (name, title, start, comp)
☐ Organization chart
☐ Offer letters (key employees)
☐ Employment agreements
☐ Non-compete/NDA agreements
☐ Severance agreements
☐ Contractor agreements
☐ Compensation philosophy/bands
☐ Benefits summary
☐ 401(k) plan documents
☐ COBRA compliance
Status: ___ of ___ ready

LEGAL/COMPLIANCE:

☐ Litigation summary
☐ Outstanding claims
☐ Regulatory correspondence
☐ Insurance policies (all)
☐ Insurance claims history
☐ Compliance certifications
☐ Privacy policy
☐ Terms of service
Status: ___ of ___ ready

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SECTION 3: DD RESPONSE PROCESS
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REQUEST MANAGEMENT:

Request Received:
☐ Log in DD tracker
☐ Acknowledge receipt
☐ Set internal deadline
☐ Assign owner(s)
☐ Prioritize (critical/important/standard)

Document Gathering:
☐ Check data room for existing
☐ Identify gaps
☐ Request from internal teams
☐ Create/compile if needed
☐ Target: 24-48 hours

Review Before Upload:
☐ Accuracy verified
☐ Current version confirmed
☐ Sensitive info reviewed
☐ Redactions applied (if needed)
☐ Legal review (if sensitive)
☐ Watermarks applied
☐ Naming convention followed

Delivery:
☐ Upload to data room
☐ Organize in correct folder
☐ Update DD tracker
☐ Notify counterparty
☐ Log in activity tracker

Follow-Up Questions:
☐ Route to appropriate person
☐ Draft response
☐ Legal review (if needed)
☐ Send within 24 hours
☐ Track in Q&A log

DD RESPONSE TIMELINE:
☐ Day 1-2: Priority documents
☐ Day 3-5: Core documents
☐ Day 6-10: Remaining items
☐ Ongoing: Questions and follow-ups

DD Gap Tracker

Document	Status	Owner	Gap/Issue	Resolution	Due Date
	☐ Ready ☐ Missing ☐ Creating
	☐ Ready ☐ Missing ☐ Creating
	☐ Ready ☐ Missing ☐ Creating
	☐ Ready ☐ Missing ☐ Creating
	☐ Ready ☐ Missing ☐ Creating

DD Q&A Log

#	Date	Question	Assigned	Response	Approved	Sent
1					☐	☐
2					☐	☐
3					☐	☐

DD Red Flag Prevention

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COMMON DD RED FLAGS (AND PREVENTION)
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CORPORATE:
☒ Missing board/stockholder consents
   Prevention: Regular governance hygiene
☒ Incomplete stock records
   Prevention: Maintain current stock ledger
☒ Undocumented verbal agreements
   Prevention: Paper everything

FINANCIAL:
☒ Revenue recognition issues
   Prevention: Follow GAAP from start
☒ Unrecorded liabilities
   Prevention: Accurate accruals
☒ Unusual related-party transactions
   Prevention: Arm's length, documented

IP:
☒ Missing IP assignments
   Prevention: Sign before work starts
☒ Open source compliance issues
   Prevention: Track and comply with licenses
☒ Third-party IP claims
   Prevention: Freedom to operate analysis

EMPLOYMENT:
☒ Misclassified contractors
   Prevention: Proper classification analysis
☒ Missing non-competes/NDAs
   Prevention: Standard new hire process
☒ Undocumented compensation promises
   Prevention: Written offers only

LEGAL:
☒ Undisclosed litigation
   Prevention: Track all claims
☒ Regulatory non-compliance
   Prevention: Proactive compliance
☒ Contract breaches
   Prevention: Contract management

DD Readiness Scorecard

Category	Total Items	Ready	Missing	Score
Corporate				/100
Financial				/100
Equity				/100
IP				/100
Commercial				/100
Employment				/100
Legal				/100
Overall				/100

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