Blog
Due Diligence Readiness: How to Prepare Before You Raise
Diligence starts at the term sheet. Readiness starts months before.
Most founders think of due diligence as something that happens after an investor says yes. In practice, it starts the day the term sheet is signed, and it moves fast. Investor counsel sends a request list within days, and every week the round stays open is a week the deal can cool, the terms can shift, or a second investor can get nervous.
The founders who close on schedule are not the ones who scramble best during diligence. They are the ones who did the work before the raise started: their documents organized, their cap table reconciled, their gaps already fixed.
I have watched rounds stall for weeks over a missing signature or an option grant nobody approved. None of those problems were created during the raise. They were created months or years earlier, and the raise was simply the first time anyone looked. This post is about looking first.
What investors will ask for
Request lists vary by investor and stage, but at seed and Series A they cover the same ground.
| Area | What they ask for |
|---|---|
| Formation | Certificate of incorporation and every amendment, bylaws, initial board actions |
| Capitalization | Cap table, stock ledger, every board approval for issuances and grants |
| Equity | Equity plan, option grants, 409A valuations, founder vesting agreements, 83(b) elections |
| Prior financings | SAFEs, convertible notes, side letters, earlier round documents |
| IP | Invention and IP assignment agreements from founders, employees and contractors |
| Team | Offer letters, contractor agreements, key employee terms |
| Commercial | Material customer and vendor contracts, partnership agreements |
| Compliance | Good standing certificate, tax filings, securities filings |
| Financials | Financial statements, burn and runway, key metrics |
The list is not the hard part. The hard part is that investors check whether these documents agree with each other. A cap table that shows 10 million shares outstanding needs signed approvals adding up to 10 million shares. An option grant needs a plan that existed on the grant date. That consistency is what readiness actually means.
A readiness timeline
Start six months before you plan to raise. If you are closer than that, start today and compress.
Six months out: find the gaps.
- Gather every corporate document into one place.
- Run a readiness check: compare the documents against the cap table and list every mismatch.
- Identify what is missing: unsigned consents, missing IP assignments, grants without approvals.
Three months out: fix them.
- Ratify any defective acts with your lawyer. This can take weeks if stockholder approval is needed.
- Collect missing signatures, including from former cofounders and contractors, while relationships are still warm.
- Refresh your 409A if it is more than a year old or a material event has happened since.
- Restore good standing and catch up on any state filings.
One month out: build the data room.
- Organize documents the way investors review them: formation, capitalization, IP, prior financings, contracts, compliance.
- Write a short cover note listing any known issues and how they are resolved.
- Set up trackable sharing so you know which investors open what, and when.
When the term sheet arrives, the data room is already done. Diligence becomes a confirmation instead of an investigation.
The gaps founders find too late
These are the findings that most often surprise founders in diligence, and every one of them is easier to fix six months early than six days into a raise.
- An option grant nobody approved. The grant letter exists, the employee is vesting, but the board never signed off. Fixing it requires a ratification and can create tax questions.
- A missing IP assignment. A cofounder who left, or an early contractor who built the first version, never signed one. Investors may not close until they do.
- A missing 83(b) election. Founders who bought restricted stock and cannot prove they filed within 30 days face a tax problem that cannot be undone after the fact.
- A SAFE that converts differently than you modeled. A cap, discount or MFN clause changes the math, and the cap table you shared with investors turns out to be wrong.
- Lapsed good standing. An unpaid franchise tax or missed annual report. Easy to fix, but it signals nobody has been watching.
Each of these is a small fix in a quiet month and a closing delay in a busy one. Finding them early is the entire game.
Start your readiness check today
You do not need a term sheet to start preparing for diligence. You need your documents in one place and an honest look at what they say.
DocChief runs that check for you. Upload your corporate documents and DocChief reads every one, reconstructs your cap table history, and flags the gaps investors will find, so you can fix them on your schedule instead of theirs. When you are ready to raise, it builds your data room from the same records. The readiness check is included in the free plan.
About DocChief AI
DocChief AI is an active fundraising assistant for startups. It checks your readiness, builds your data room, tracks how investors engage, and runs diligence in one place. Start free at docchief.ai.