The Due Diligence Checklist Every Investor Needs

The Complete Checklist

Most investors skip critical DD steps because they don't have a systematic checklist. Here's the comprehensive due diligence checklist I use for every investment.

Pre-Meeting Checklist

Company Research

• Verify company exists (Secretary of State filing)
• Check founding date and registered agent
• Search for UCC filings (secured debt)
• Check for tax liens
• Verify website ownership and age

Founder Research

• LinkedIn employment history verified
• Education claims checked
• Previous startup outcomes researched
• Social media presence verified
• Google search for red flags

Market Research

• TAM calculation methodology understood
• Competitor landscape mapped
• Industry growth rate verified
• Regulatory environment understood

First Meeting Checklist

Problem & Solution

• Can articulate the #1 customer pain point
• Can explain the current solution gap
• Can show evidence of real demand
• Can explain why now is the right time

Product

• Live demo or product walkthrough
• Can explain the tech stack
• Can identify the competitive moat
• Can show roadmap for next 12 months

Business Model

• Can explain pricing and revenue model
• Can show unit economics (LTV, CAC, payback)
• Can explain customer acquisition strategy
• Can show gross margin breakdown

Traction

• Can show MRR/ARR with documentation
• Can show customer concentration
• Can show cohort retention data
• Can explain growth rate and trajectory

Team

• Can explain why this team
• Can verify founder backgrounds
• Can explain co-founder dynamics
• Can show advisor relationships

Deep Dive Checklist

Financial Verification

• Stripe dashboard verified (with founder permission)
• Bank statements reviewed (redacted)
• Revenue breakdown by customer provided
• Burn rate breakdown provided

Cap Table Review

• Full cap table obtained
• Option pool size and source identified
• All outstanding instruments listed
• Dissenting shareholders identified

Legal Review

• All material contracts reviewed
• Pending litigation disclosed
• IP ownership verified
• Regulatory status confirmed

Reference Checks

• 2 professional references contacted
• 2 customer references contacted
• Previous investor references (if applicable)
• Board member references (if applicable)

Market Deep Dive

• TAM recalculated independently
• Competitive positioning verified
• Customer concentration risk assessed
• Market timing validated

Term Sheet Checklist

Valuation

• Pre-money valuation benchmarked
• Post-money valuation calculated
• Price per share determined
• Dilution across rounds modeled

Economic Terms

• Liquidation preference negotiated (target: 1x non-participating)
• Anti-dilution protection reviewed (target: broad-based WA)
• Pro-rata rights clarified (target: standard, capped at 2x)
• Dividend terms reviewed (usually none for early stage)

Control Terms

• Board composition agreed
• Protective provisions negotiated
• Information rights defined
• Drag-along rights reviewed

Additional Terms

• Founder vesting terms reviewed
• Employee option pool confirmed
• Intellectual property assignments verified
• Non-compete agreements reviewed

Final Decision Checklist

Investment Thesis

• Written thesis document completed
• Key risks identified
• Mitigation strategies defined
• Conviction level assessed (high/medium/low)

Deal Economics

• Ownership % calculated
• Expected return estimated
• Base case modeled
• Downside scenario assessed

Execution Risk

• Team execution risk assessed
• Market timing risk assessed
• Competitive risk assessed
• Regulatory risk assessed

Decision

• Proceed to invest
• Proceed with caution (smaller check, better terms)
• Pass and wait for next round
• Pass and refer to another investor

Red Flags by Category

Company Red Flags

• Company not registered where claimed
• Recent UCC filings indicating debt
• Tax liens or judgments
• Dissolved or administratively revoked status

Team Red Flags

• Cannot verify employment history
• Previous company failures undisclosed
• Education claims cannot be verified
• Litigation history involving fraud

Financial Red Flags

• Revenue unverifiable
• Customer concentration >40%
• Gross margin significantly below industry
• Burn rate doesn't match employee count

Market Red Flags

• TAM inflated >10x
• Claims of "first mover" when competitors dominate
• Regulatory barriers not disclosed
• Market timing doesn't match product readiness

Product Red Flags

• "Proprietary" technology easily replicated
• No competitive moat identified
• Product not live or still in beta after 12+ months
• User claims don't match traffic data

Key Takeaways

1. Use a systematic checklist - Don't skip steps due to time pressure
2. Layer your verification - Cross-reference multiple sources
3. Reference checks are non-negotiable - Talk to real people
4. Term sheet review is critical - Terms matter as much as valuation
5. Soloanalyst automates the checklist - 5-minute verification for every stage

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