Due diligence is the investigation an investor runs before finalizing an investment, meant to verify the claims made in the pitch and confirm the business fundamentals are sound. It typically covers financials, legal matters, technology, team backgrounds, customer references, the cap table, contracts, and intellectual property ownership. A clean process can close in one to four weeks for seed deals and four to eight weeks for Series A and beyond, and a well-organized data room is the single biggest lever founders have to speed it up.
Investors typically review financials and metrics, the cap table and any outstanding SAFEs or notes, customer and revenue contracts, intellectual property ownership, team backgrounds, and reference calls with customers and former colleagues. Legal review covers incorporation documents, any litigation history, and employment agreements.
Diligence usually starts once you have a signed term sheet and moves in parallel with legal drafting. The investor's team, sometimes including outside lawyers and accountants for larger rounds, works through a checklist against the materials in your data room, then follows up with calls to close open questions before the round closes.
Angel and seed rounds typically take one to four weeks. Series A rounds typically take four to eight weeks. Later stages can run six to twelve weeks given the added legal and financial complexity. A clean, well-organized data room can meaningfully cut these timelines at every stage.
You sign a term sheet for a $2,000,000 seed round on a Friday. Over the next two weeks, the investor reviews your data room, calls three reference customers, and confirms your IP assignment agreements are signed by every engineer who has ever touched the codebase. No surprises turn up, so the round closes three weeks after the term sheet was signed, well within the typical seed timeline.
Metrics presented in the pitch that do not match what the data actually shows once an investor checks the underlying numbers is one of the fastest ways to lose a deal's momentum.
Other frequent deal-breakers: undisclosed legal issues or liabilities, a messy cap table with unresolved equity disputes, heavy customer concentration, intellectual property never properly assigned to the company by a contractor or early engineer, and unresolved co-founder conflicts that surface during reference calls.
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