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If you are raising capital from professional investors, due diligence is coming.
Most founders underestimate two things about due diligence:
This article breaks down what you should be thinking about before due diligence begins and how to get ahead of it.
Founders often assume due diligence happens after a term sheet. In practice, investors start validating your business from the first conversation.
Early questions about your cap table, revenue, customers, or product roadmap are already part of diligence. A formal data room just means the process has become structured.
If you wait until an investor asks for access to a data room, you are already reacting. The goal is to be ready before that moment.
Whilst the specific documents needed in a data room for due diligence may vary business to business, there are core categories to cover off in a data room to help investors gain confidence in investing in your business.
The core categories include:
Once you understand these categories, it becomes much easier to prepare the underlying documents in a clean and logical way.
Before you start approaching investors, you should already have a baseline data room prepared. It does not need to be perfect, but it should be coherent and complete.
At a minimum, most founders should have:
The point is not volume, the point is clarity, for yourself and investors. A clear data room with your key documents is your initial reference point, so you can be certain you can back up the answers you give to investors’ questions.
Once you start speaking to investors, you can go one step further and tailor your preparation.
Many venture funds publicly explain how they invest and what they look for during due diligence. Some even publish their diligence checklists or investment ethos.
For example, firms like Airtree, Skalata, One Ventures, and Rampersand all share insights into their investment process and the areas they focus on.
Reading this material helps you anticipate what matters most to each investor. In a competitive investment market, you can position yourself ahead of other businesses seeking funding by tailoring your data room to an investor’s due diligence needs.
You do not change your business to suit the investor. You change how prepared you are to answer their questions.
When founders are prepared for due diligence, a few things consistently happen:
Good diligence preparation also signals how you will operate post-investment, investors notice.
At its core, due diligence is about translating your story into evidence.
You already know your business. Due diligence is simply how you prove it. When you prepare early, the process becomes straightforward and often collaborative.
The best time to prepare for due diligence is before you need to.
At Tallystone, we see due diligence preparation as part of being genuinely capital ready. Founders who treat it that way consistently raise faster and with less friction.