Due diligence is the investigation an investor runs on a startup between term sheet and closing to verify claims and surface hidden risks. The scope covers business, financial, legal, and technical risk before any money is wired. It is what turns a non-binding term sheet into a closed deal, and it is also the phase where most deals that fall apart fall apart.
A standard early-stage diligence package covers commercial diligence (market size, competition, customer references, pipeline), financial diligence (cap table accuracy, historical and projected financials, runway, burn), legal diligence (incorporation documents, IP assignment from every founder and contractor, employment agreements, prior financing documents, any litigati...