I used to spend 8-10 hours on due diligence for every deal. Now I spend 45 minutes on the first pass and 2-4 hours on the second.
The difference was building a systematic checklist that covers every dimension without falling down rabbit holes.
Here's the checklist I use:
Product Diligence
1. Is there a real product?
- Working demo or beta access
- Signed customers (revenue or pilot)
- Not just an "MVP" with fake users
2. How defensible is the product?
- Technical barriers: proprietary tech, data moat, unique algorithms
- UX barriers: network effects, habit, integration
- Regulatory barriers: licenses, patents, certifications
3. What does the user journey look like?
- First-use experience
- Retention curve (day 1, day 7, day 30)
- Customer support load vs. usage
Team Diligence
4. Are the founders telling the truth?
- Employment history verification
- Education verification
- Reference checks (personal and professional)
5. Are they the right team for this market?
- Domain expertise validated
- Previous operator experience in similar company
- Founder-market fit for this stage
6. How do they make decisions?
- Board meeting observation
- Response to hard questions
- Willingness to admit what they don't know
Market Diligence
7. Is the market real?
- Top-down TAM validation
- Bottom-up customer count from actual data
- Customer interviews (at least 5)
8. What's the competitive dynamic?
- Direct competitors (3-5)
- Indirect competitors
- Why now? (Why is this the right time to start this?)
9. What's the channel to market?
- How do you acquire customers?
- What's the effective cost?
- Is there a scalable playbook or is it all founder-dependent?
Financial Diligence
10. Is the unit economics real?
- CAC (customer acquisition cost) by channel
- LTV (lifetime value) from actual data
- Payback period
- Gross margin by product
11. What's the path to profitability?
- Cash burn vs. runway
- Path to unit economics breakeven
- Financing history and burn rate
12. Is there hidden debt?
- Convertible notes outstanding
- SAFE agreements
- Debt from investors or third parties
Legal Diligence
13. Corporate structure
- Entity formation and good standing
- Ownership cap table vs. actual
- State of incorporation and why
14. IP ownership
- Are all founders on IP assignment agreements?
- Is there proprietary IP or just know-how?
- Are there open-source components that create obligations?
15. Legal conflicts
- Outstanding litigation
- Regulatory issues
- Key person employment agreements (non-competes, IP)
The Due Diligence Process
- First pass (45 min): Cover everything at a surface level. Flag the 2-3 things that need deep-dive.
- Second pass (2-4 hours): Deep-dive on the flagged areas. Data calls, reference checks, document review.
- Decision: Pass, pass with conditions, or pass and lead.
Soloanalyst's Role
Soloanalyst automates the first pass across multiple data dimensions: team history, market signals, competitive landscape, and financial pattern matching.
It won't tell you if the deal is good. It will tell you if the founder is lying.