VC Due Diligence Checklist

As the leading CPA 100% dedicated to VC-backed startups, we’ve helped over one thousand startups raise venture and seed funding – and see scores of VC due diligence checklists every month.

In this article, explain what goes into the typical due diligence checklist by stage. Scroll down to see pre-seed/seed, Series A and Series B diligence checklists based on the most recent deals we’ve advised founders on.

Due Diligence By Funding Stage

In Silicon Valley, the amount of effort put into diligence dramatically increases depending on the stage of the investment. Pre-seed and seed stage companies don’t have reams of historical financial data and customer interactions to investigate, whereas Series B and beyond companies have customer data, product usage, operational histories, and complex financial records that require deep, thorough examination. Let’s dive into the major items that VCs will examine by stage.

Pre-Seed/Seed Stage Due Diligence

  • Focus: Founding team, market opportunity, core idea.
  • Management Team: Skill sets, dedication, and ability to execute.
  • Market Validation: Addressable market size.
  • GTM: Coherent, high-level go-to-market ideas.
  • Product: MVP or prototype, initial customer validation.
  • Legal: Ensuring the company is correctly incorporated, intellectual property (if any) is protected.
  • Finances: Basic financial model, use of funds, and burn rate.
  • Accounting and Tax Compliance: Verification that the company has separate bank accounts for business purposes and that there is no commingling of personal and business expenses. Initial assessment of the company’s commitment to maintaining proper financial records.
  • Checklist Complexity: Simple, often delivered via email text.

Series A Due Diligence

  • Focus: Product-market fit, initial traction, scalability.
  • Management Team: Expanded team capabilities and fit; success recruiting top-tier talent.
  • Market Validation: Revenue, user engagement, proof of demand.
  • GTM: One or more successful, scalable GTM channels executing at respectable CAC.
  • Product: Roadmap, technology stack.
  • Legal: Intellectual property, compliance checks, existing contracts.
  • Finances: Detailed GAAP financial statements, cash flow projections, unit economics.
  • Accounting and Tax Compliance: More formalized accounting processes, adherence to tax obligations.
  • Checklist Complexity: More complex for product, sales & marketing diligence, modest accounting checklist complexity, typically delivered as a PDF attachment in an email.

Series B Due Diligence

  • Focus: Scaling, operational efficiency, profitability path.
  • Management Team: C-suite and key management.
  • Market Validation: Growth, customer retention, market share.
  • GTM: Functioning GTM system and team that can scale at attractive CACs.
  • Product: Maturity, scalability.
  • Legal: Expanded compliance checks, employee contracts, potential litigation risks.
  • Finances: Historical performance, revenue diversification, capital allocation.
  • Accounting and Tax Compliance: Mature accounting practices, multi-jurisdiction tax compliance if expanding geographically, prepared to be audited (may not be required, but should be able to do an audit if needed).
  • Checklist Complexity: Highly complex diligence around customer metrics, sales and marketing, expect detailed questions on margins and strategic accounting items, and a long list of accounting and tax files; typically delivered as a PDF attachment in an email.

Series C and Beyond Due Diligence

  • Focus: Market leadership, new market or product expansion, corporate governance.
  • Management Team: Experience in scaling, potentially going public or being acquired.
  • Market Validation: Market leadership, competitive positioning, health of underlying market.
  • GTM: Best in market GTM team, strategy and systems with highly-scalable, cost-effective channels.
  • Product: Intellectual property portfolio, featureset competitive advantages.
  • Legal and Regulatory: More stringent legal checks, compliance in multiple jurisdictions, preparations for IPO or acquisition.
  • Finances: Comprehensive financial models, EBITDA, public market readiness (if relevant).
  • Accounting and Tax Compliance: Complete audits, preparation for public scrutiny, international tax compliance, and planning.
  • Checklist Complexity: Highly complex diligence around customer metrics, sales and marketing; likely outsourced accounting and tax diligence to sophisticated accounting firm who will produce a minutely detailed report; checklist will be delivered by a variety of spreadsheets and PDFs.

The diligence process intensifies at each stage to match the increasing complexity and stakes of the investment. Early stages focus on potential and basic compliance, while later stages scrutinize performance, scalability, and adherence to more complex legal and regulatory standards.

Downloadable Due Diligence Checklists

Startups are complicated, and investors don’t want to miss important details when they’re considering funding your business. So they’ll go through a due diligence process to assess and evaluate your startup. We’ve compiled checklists of common items that venture capitalists and other investors might request during the diligence process, to help you start assembling the information. We’ve also included descriptions of each item and reasons why investors want to see it. The checklists are separated into company stages.

Remember: Every deal is different, and your investors may ask for other information that’s not on these checklists. If you’re going through diligence, make sure to consult your legal counsel and accounting team.

Interactive Due Diligence Checklist

This interactive due diligence checklist template lists out many of the items that VCs and professional investors will ask for - by stage. Simply click to expand each section, and then will see a list of items, and then to the right a table that indicates at which stages investors are likely to ask for any specific item.

NOTE: All parties to any financing agreement should consult with their legal counsel and accounting advisors for specific due diligence requirements related to their individual circumstances, investing goals, and business requirements.

Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Founder’s professional and educational background (and location) Current Outline experience and past successes, if applicable. Address failures by explaining what you learned. Yes Yes Yes Yes Yes
Founding team’s relevant skills and industry experience Current Show the team's experience, past successes, and how they complement each other (for example, leader, engineer, salesperson, etc.). Yes Yes Yes Yes Yes
Assessment of the founder’s commitment, enthusiasm, and passion Current Tell the story behind your idea and what you hope to accomplish. Yes Yes Yes Yes Yes
Clear communication of the founder’s vision for the company Current Explain your thoughts about the ecosystem your startup occupies and your overall trajectory for the company. Yes Yes Yes Yes Yes
Exit strategy, including potential acquirers or IPO plans Current Honestly assess your startup's potential and limitations, and demonstrate your understanding of possible successful outcomes. No No No No Maybe
Founder criminal history or legal history All Disclose if a founder has had any legal or regulatory issues - it is best to disclose this even if it is not asked for by investors. Maybe Maybe Maybe Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Income statement Last 3 years by month and by year One of three key financial statements that shows the company's financial performance over a specific accounting period. Yes Yes Yes Yes Yes
Balance sheet Last 3 years by month and by year One of three key financial statements showing assets, liabilities, and capital of the startup at a specific date. Yes Yes Yes Yes Yes
Cash flow statement Last 3 years by month and by year One of three key financial statements that summarizes the amount of cash entering and exiting a startup. Yes Yes Yes Yes Yes
Bank statements Previous 6 months Bank statements should reconcile with financial statements. Maybe Maybe Yes Yes Yes
Financial projections Next 3 years by month and by year Explain the key KPIs and how they change as the company matures. Yes Yes Yes Yes Yes
Detailed capitalization table, including shares, options, SAFEs, and convertible notes Current The cap table helps investors model different investment scenarios. Yes Yes Yes Yes Yes
Option pool details Current Summary of vesting schedule, ungranted option details, projections on options to be granted in next 12 to 24 months Yes Yes Yes Yes Yes
History of funding rounds, including valuation and terms Since founding Shows how the startup's financial performance has grown by achieving targets. Yes Yes Yes Yes Yes
List of current investors and their ownership stakes Current Disclose current investors, their stakes and what type of security they hold. Yes Yes Yes Yes Yes
Bookings history and projections Last 3 years history and next 3 years of projections, by month and by year For companies with sales teams. Yes Yes Yes Yes Yes
Accounts receivable (AR) aging and projections Current period Include any AR greater than 90 days past due. No No Maybe Yes Yes
Revenue recognition policies Current period Policy should match up costs and revenue associated with long-term projects or contracts. No No Maybe Yes Yes
Deferred revenue details and projections Recent period, near-term projections Highlight the product or service associated with major deferred revenue positions; investors may ask for this by major customer as well. No No Yes Yes Yes
Schedule of bad debt and write offs Recent period, near-term projections Include any material projections. No No No Maybe Yes
Inventory Current period Value by raw materials and SKU. Include aging and any amounts deemed obsolete. No No Yes Yes Yes
Accounts payable (AP) Current period List of any employees or service providers that are unpaid, have not been paid in full to date, or are subject to any payment deferral arrangements. No No Maybe Yes Yes
Name of current accounting system Current Include the date the company started using the system. No Maybe Yes Yes Yes
Name of current payroll system Current Include the date the company started using the system, and payroll schedule (weekly, bi-monthly, monthly). No Maybe Maybe Yes Yes
Contracts and Invoices for top 10 clients Current period Only relevent an enterprise sales model. No Maybe Yes Yes Yes
Derail for any major churned clients Last 6 months Mainly for enterprise sales models, but some VCs may want to diligence churned customers. No Maybe Yes Yes Yes
Leases Current period Any agreements concerning the purchase, lease, or sublease of real property, and any personal property leases. No No Maybe Yes Yes
Material contracts Current Any agreements, understandings, instruments, contracts, or proposed transactions to which the company is a party or by which it is bound which involve obligations of, or payments to, the company in excess of $20,000. No Maybe Maybe Yes Yes
Gross margin analysis Current Measured by subtracting all costs associated with producing a product from the selling price; VCs will want to investigate any trends. No No Maybe Maybe Yes
Cash burn rate Current period, near-term projections The amount of cash a startup is spending each month. Yes Yes Yes Yes Yes
Customer acquisition cost (CAC) Current and previous year How much a startup spends to get new customers. Highlight expenses included and excluded. Consider monthly of quarterly cohorts to show trends. Maybe Maybe Yes Yes Yes
Customer lifetime value (LTV) Current and previous year The average customer's revenue generated over their entire relationship with the company. Explain the assumptions behind the calculation. No Maybe Yes Yes Yes
Customer churn rate Current and previous year The number of customers lost during a given time period. Explain any changes in churn rate. VCs wil likely ask for cohorts of data by date of customer acquisition. No Maybe Yes Yes Yes
Venture debt/lines of credit detail Current Explain any venture debt or lines of credit/loans currently in place; share contracts and payment schedules; disclose any covenant violations or negative correspondence from the lender No No Maybe Maybe Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Federal tax returns Last 3 years Shows the startup's tax exposure and any compliance issues. Maybe Maybe Yes Yes Yes
Local/state tax filings Last 3 years Ensures the startup is filing in every appropriate jurisdiction and any compliance issues. Maybe Maybe Yes Yes Yes
Correspondence with tax authorities Since inception Federal, state and local – any correspondence between the company and the IRS or any state or local tax bureau or any federal, state or local governmental authority. Maybe Maybe Yes Yes Yes
409A valuations Last 2 valuations Copies of Internal Revenue Code Section 409A valuation reports. No Maybe Yes Yes Yes
Research and development (R&D) tax credit reports Current period Shows the startup is optimizing R&D credits. No Maybe Maybe Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Organization chart Current Shows the corporate structure and who reports to whom. No No No Maybe Yes
Salary schedule for all employees Current List employee pay, include bonuses and other cash compensation, and if this is expected to change materially; this is a good place to disclose expected founder pay. Maybe Maybe Maybe Yes Yes
Consultants Current period List of consultants, roles, and costs. Maybe Maybe Maybe Yes Yes
Projected hiring plans Next 3 years Projected hires by month, with title and projected compensation. Yes Yes Yes Yes Yes
Transactions with officers Current period Any existing or proposed agreements, understandings, or transactions between the company and any of its officers, directors, material stockholders, or any affiliate including, without limitation, non-competition agreements, employment agreements and non-form offer letters. Maybe Maybe Yes Yes Yes
Insurance Current period Any insurance policies (including documentation regarding workers’ compensation insurance) held by the company or of which the company is a beneficiary and a summary of such policies, if available. Maybe Yes Yes Yes Yes
Offer letters Current period Copy of the company’s standard offer letter. No No Maybe Maybe Yes
Special employee agreements Current period All employment agreements and other documents (such as offer letters) that contain change of control, severance provisions, bonus provisions, or acceleration of stock or option vesting. Maybe Yes Yes Yes Yes
Special agreements with founders, investors, etc. Current period Any agreements with founders, investors, etc. NaN NaN NaN NaN NaN
Employee benefits Current period Any employee benefit plans and arrangements, including, without limitation, stock option plans, bonus plans, pension plans, 401(k) plans insurance plans, and forms of agreements (including copies of all form of option and stock agreements that are in use). No No Maybe Maybe Yes
Employee accrued expenses Current period A list and breakdown of all outstanding accrued salary, paid time off, and reimbursable expenses. No No Maybe Maybe Yes
Foreign employees Current period A list (separated by country) of any foreign employees and their locations, with all benefits provided to foreign employees. No No Maybe Maybe Yes
Workers' compensation and unemployment claims history Since inception These claims represent a liability for the startup. No No Maybe Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Overview of current and planned products or services Current period, projections Detailed assessment of product/service as it stands and how it will be developed. Yes Yes Yes Yes Yes
Analysis of discontinued products and reasons Since inception Demonstrate what the startup learned from discontinued products. Maybe Maybe Yes Yes Yes
Key customer contracts, including terms and payment structures Since inception Shows product viability and market fit. Maybe Maybe Yes Yes Yes
Key customer churn risks Since inception Disclose any important customers who are renewing soon and the risk of churn. Maybe Maybe Yes Yes Yes
Market size and growth potential Since inception Demonstrate that the commercial strategy is sustainable. Yes Yes Yes Yes Yes
Identification of key competitors and their strengths and weaknesses Current Describe the competitive landscape and overall market. Yes Yes Yes Yes Yes
Analysis of the company’s unique value proposition and differentiators Current Explain why customers will choose your product over other options. Yes Yes Yes Yes Yes
Assessment of barriers to entry and competitive threats Current Outline factors that prevent newcomers from entering the market and limits competition. Yes Yes Yes Yes Yes
Marketing strategy and cost to execute Current Describe your strategic roadmap for executing and tracking marketing tactics and generating leads. Maybe Maybe Yes Yes Yes
Sales strategy and cost to execute Current Describe your sales goals and plans to achieve them. Maybe Maybe Yes Yes Yes
Sales cycle analysis Current Explain the repeatable and tactical process used to turn leads into customers. No No Maybe Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Overview of material vendor and supplier contracts Current period, projections Document all relationships with vendors, suppliers, and contractors. No Maybe Maybe Yes Yes
Critical vendor risks Current period, projections Explain any possible risks or concerns about important vendors. NaN NaN NaN NaN NaN
Insurance coverage, including liability, workers’ compensation, and directors & officers (D&O) insurance Current period, projections Explain and document the startup's general risk management strategy. Maybe Yes Yes Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
List of patents, trademarks, copyrights, and other intellectual property (IP) Current IP is a major basis for a startup's valuation. Maybe Yes Yes Yes Yes
Licensing agreements or IP-related partnerships NaN Validate the startup's IP claims. Maybe Yes Yes Yes Yes
IP protection strategy, including non-disclosure agreements (NDAs) NaN Explain your comprehensive plan to safeguard IP, including copyrights, patents, and trademarks. Maybe Yes Yes Yes Yes
Any pending or potential IP litigation NaN VCs will evaluate how legally sound and solid the startup's IP is; dislcose any potential litigation even if not asked about it. Maybe Maybe Yes Yes Yes
Invention agreements signed by employees, founders, consultants, etc. Since inception Demonstrate that the startup has ownership of inventions and intellectual property. Maybe Maybe Yes Yes Yes
List of employees, consultants, founders who have not signed intellectual property (IP) agreements Since inception Demonstrate that startup IP Is appropriately protected. No Maybe Yes Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
BOD/shareholder meeting minutes and actions Last 3 years Demonstrate evidence of board decisions and approvals. No No Maybe Yes Yes
List of any ongoing or potential legal disputes or liabilities Current Identify any legal disputes that could limit the company's growth, including litigation, consent decrees, injunctions, judgments, or settlement agreements. Maybe Yes Yes Yes Yes
Overview of regulatory and environmental compliance, including industry-specific requirements Current Assess the regulatory environment and outline any risks that could limit the startup's growth. Maybe Maybe Maybe Yes Yes
Articles of incorporation and current certificate of incorporation Since inception Prove that you are legally registered and provide any amendments. Yes Yes Yes Yes Yes
State certificate of good standing Current Prove that you are correctly registered to do business in the states where you operate. No No Maybe Maybe Yes
Bylaws and amendments Current These documents include details about company management that aren't included in articles of incorporation. Yes Yes Yes Yes Yes
Existing shareholder agreements, SAFE, and convertible debt documentation Current VCs need to verify the terms of these obligations since they affect company valuation. Yes Yes Yes Yes Yes
Licenses and permits Current Show that the startup is compliant with laws and regulations. No No Maybe Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Real estate Current LIstings of all owned or leased property and locations, with copies of deeds, mortgages, leases, and title policies. No No Maybe Yes Yes
Equipment Last 3 years LIst of all major equipment purchases and sales, and a list of any leased equipment. No No Maybe Yes Yes
Schedule of fixed assets Current List of all fixed assets with identifications numbers, description, original cost, and depreciation. No No Maybe Yes Yes
Information Requested Period Requested Description Pre-Seed Seed Series A Series B Series C
Software used and any software licenses Current This review validates the startup's development, processes, and practices. No No Maybe Yes Yes
Data management and data security practices Current VCs need to understand the startup's cybersecurity risks or vulnerabilities. No No Maybe Yes Yes
Current technology stack system Current Explain your infrastructure and tech stack choices and describe how well your system performs. No Maybe Yes Yes Yes
Agreements with external IT companies Current Any external IT contracts are part of an analysis of the startup's systems. No No Maybe Yes Yes
Disaster recovery plan Current This review helps demonstrate the overall health of the startup's IT infrastructure and risk mitigation. No No Maybe Maybe Yes
Cybersecurity breaches, if any Since inception Describe any breaches and explain the risk remediation methods put into place as a result. (These should be disclosed even if the investor does not ask). No No Maybe Maybe Yes