Building Your Due Diligence Workflow: A Systematic Approach

Why You Need a Systematic Process

Most angel investors do due diligence reactively - they take meetings as they come, ask random questions, and make decisions based on gut feel. The best investors have a systematic process that ensures they catch everything important without wasting time.

Here's the workflow I use to evaluate 50+ deals per year without losing weekends.

The 5-Stage DD Workflow

Stage 1: Initial Screening (15 minutes)

Goal: Decide whether to take the first meeting.

Criteria:

• Does the problem matter? (Is this a real pain point or a solution looking for a problem?)
• Is the market big enough? (Even at their stage, can this be a $100M+ company?)
• Is the team credible? (Do they have the background to build this?)
• Do I have conviction? (Would I regret not investing if this wins?)

The test:

Before the meeting, ask yourself:
- "If this company succeeds, will I be surprised?"
- "If this company fails, will I be surprised?"

If both answers are "no," proceed.
If either answer is "yes," think harder.

What to do:

• Read the pitch deck
• Check the founders' LinkedIn
• Look at the website
• Form a preliminary opinion

Output: Yes/No on first meeting. Keep notes on initial thesis.

Stage 2: First Meeting (45-60 minutes)

Goal: Validate what was in the deck. Discover what's NOT in the deck.

The framework:

1. Problem validation (10 min)

   • "What's the #1 reason customers buy from you today?"
   • "What would have to be true for this to be a $100M business?"
   • "Who's your customer and what's their job-to-be-done?"

2. Product validation (10 min)

   • Live demo or product walkthrough
   • What's real vs what they're building?
   • What's the用户体验?

3. Traction validation (10 min)

   • MRR/ARR with documentation
   • Customer concentration
   • Cohort retention

4. Team validation (10 min)

   • Background check
   • Co-founder dynamics
   • References

5. Ask your most important question (5 min)

   • Something specific to what you found in stages 1-4
   • Your "so what?" question

What to do after:

• Run Soloanalyst verification report
• Check references
• Research the market independently

Output: Decision on second meeting. Specific questions to answer.

Stage 3: Deep Dive (1-2 hours over multiple calls)

Goal: Answer the specific questions from Stage 2. Build conviction.

The checklist:

Market questions:

• What's the actual TAM? (Not "the healthcare market" - what's YOUR addressable market?)
• Who are the 3 closest competitors? (And why will you win?)
• What's the customer's unit economics? (LTV, CAC, payback period?)

Product questions:

• What's your product roadmap for the next 12 months?
• What's the hardest thing you've built and how long did it take?
• What's your tech stack and why did you choose it?

Business model questions:

• Show me the financial model. (Does the math work at scale?)
• What's the gross margin? (SaaS should be 70%+)
• What are the 3 biggest risks and how are you addressing them?

Team questions:

• Reference check: Talk to 2 past colleagues
• Customer reference: Talk to 2 actual customers
• Background verification: Run Soloanalyst team check

Output: Decision to proceed or pass. If proceeding, thesis document.

Stage 4: Thesis Document (30 minutes)

Goal: Write down your investment thesis before you negotiate.

The template:

## Investment Thesis: [Company Name]

### The Problem
[What problem are they solving? Why does it matter?]

### The Market
[How big is the actual addressable market? What's the path to $100M ARR?]

### The Team
[Why this team? What makes them uniquely suited?]

### The Product
[What's real vs building? What's the moat?]

### The Business Model
[LTV, CAC, payback period, gross margin]

### The Risks
[Top 3 risks and mitigations]

### The Terms
[What would make this a good investment at current valuation?]

### The Decision
[Proceed / Pass]

Why this matters:

• Prevents "I forgot why I liked this" syndrome
• Forces you to confront red flags before deciding
• Creates a reference point for future rounds

Output: One-page thesis document.

Stage 5: Investment Decision (30 minutes)

Goal: Make the final decision and negotiate terms.

The decision framework:

Green light (invest):

• You have conviction on team, market, and product
• Terms are reasonable (1x non-participating liquidation, broad-based WA)
• Valuation is defensible for stage
• You can write the check without stress

Yellow light (proceed with caution):

• You like it but there are specific concerns
• Negotiate harder on terms or valuation
• Consider a smaller check with pro-rata rights for next round

Red light (pass):

• Something doesn't add up
• You can't get comfortable with the team or metrics
• Terms are predatory or valuation is insane

The negotiation:

• Know your BATNA (what's your alternative?)
• Lead with data (market comps, comparable deals)
• Know your 3 non-negotiables
• Be ready to walk away

Output: Invest or pass. If invest, complete the deal.

The Time Allocation Framework

Per Deal: 4-6 hours total

At Scale: 50+ Deals Per Year

Most angels without a system spend 10+ hours on bad deals they should have filtered out.

The filter:

1. Initial screen (15 min): 50 deals → 20 calls
2. First meeting (1 hr): 20 calls → 10 deep dives
3. Deep dive (2 hr): 10 dives → 5 investments

Time spent: (50 × 15 min) + (20 × 1 hr) + (10 × 2 hr) = 12.5 + 20 + 20 = 52.5 hours

vs. unstructured approach: 50 deals × 5 hours = 250 hours

The systematic approach saves 200 hours per year.

The DD Decision Tree

START: Deck review
│
├─ Problem unclear? → PASS
│
├─ Team seems dishonest? → PASS
│
├─ Market too small? → PASS
│
└─ Continue:
  │
  ├─ FIRST MEETING
  │ │
  │ ├─ Can't explain why customers buy? → PASS
  │ │
  │ ├─ Metrics don't add up? → PASS
  │ │
  │ ├─ Team references bad? → PASS
  │ │
  │ └─ Continue:
  │   │
  │   ├─ DEEP DIVE
  │   │ │
  │   │ ├─ Revenue unverifiable? → PASS
  │   │ │
  │   │ ├─ Market assumptions wrong? → PASS
  │   │ │
  │   │ ├─ Terms predatory? → NEGOTIATE or PASS
  │   │ │
  │   │ └─ Continue:
  │   │   │
  │   │   └─ THESIS DOCUMENT
  │   │     │
  │   │     └─ DECISION: INVEST or PASS
  │   │
  │   └─ INVEST
  │
  └─

The Tools I Use

Automated verification (Soloanalyst):

• Pitch deck verification
• Team background check
• Revenue cross-reference
• Market sizing validation

Research:

• Crunchbase / PitchBook for market data
• LinkedIn for team verification
• SimilarWeb for web traffic
• G2 / Capterra for product comparisons

Reference checks:

• Ask for 2 past colleagues + 2 customers
• Call them within 48 hours of request
• Ask: "Would you work with this person again?"

Financial analysis:

• Cap table calculator
• Dilution model
• DCF model (as reference, not primary)

The Red Flags That Kill Deals

Immediately Pass

• Founder won't show revenue documentation
• Reference checks come back bad
• Team has previous fraud or SEC issues
• Cap table is inconsistent
• Founder can't explain the business model

Proceed With Caution

• High customer concentration (mitigate with smaller check)
• Aggressive valuation (negotiate or wait for next round)
• Competitive landscape unclear (get more data)
• Technical risk unquantified (understand the development plan)

Key Takeaways

1. Systematic beats reactive - 5 hours structured vs 10+ hours random
2. Filter early and often - Pass on bad deals fast
3. Soloanalyst automates the boring checks - Use it
4. Write down your thesis - Prevents "I forgot why I liked this"
5. Know your non-negotiables - Before you negotiate

Soloanalyst DD Workflow Integration

Run Soloanalyst at every stage:

• Stage 1: Quick company scan
• Stage 2: Verification report before deep dive
• Stage 3: Full background + revenue verification
• Stage 4: Market validation against our database
• Stage 5: Terms analysis

Start your DD workflow →

This framework is part of SoloAnalyst's due diligence toolkit. For automated verification at every stage, try SoloAnalyst.