How to prepare for an investor due diligence process

Most founders who have raised a round informally are not prepared for the rigour of formal investor due diligence. It is not a sign of distrust — it's a standard process. But an unprepared founder in due diligence looks disorganised, and investors price uncertainty into their valuation or terms.

Investors will look at: corporate documents (certificate of incorporation, MOA, AOA, all shareholder resolutions, current cap table), financial statements (last 3 years audited, current year management accounts, bank statements), legal (existing contracts — client, vendor, employee — any pending litigation, IP ownership), HR (offer letters, employment agreements, key employee retention status), and a data room is the best way to share all of this — Google Drive or Notion, well organised.

The cap table must be clean. If you've issued shares informally, have convertible notes outstanding, or have promised equity to employees without formal ESOPs, clean this up before due diligence starts. Messy cap tables are one of the top deal killers.

Prepare your financial model. Investors will want to see your assumptions, not just your numbers. Revenue by segment, cost structure, headcount plan, and a 3-year projection. Be able to defend every assumption with data or clear reasoning.

Have answers ready for the difficult questions: Why hasn't growth been faster? What happened in [year of slow growth]? Who are the key people and what holds them to the company? What's the competitive threat from X? Prepare honest, specific answers — not spin.