What does diligence cover?
Investors and acquirers want to confirm ownership, authority, contracts, compliance, IP, employees, equity, and risks. The exact list changes by deal, but the themes are consistent.
Founder checklist
- Corporate: Charter, bylaws, minutes, consents, good standing certificates, foreign qualifications.
- Capitalization: Cap table, stock ledgers, founder stock, option plan, grants, SAFEs, notes, warrants.
- IP: Invention assignment agreements, contractor agreements, open source policy, trademark filings, patent materials if relevant.
- Commercial: Customer contracts, vendor contracts, partnership agreements, reseller or channel arrangements.
- Employment: Offer letters, employee handbook if any, contractor classifications, advisor agreements.
- Privacy and data: Privacy policy, data processing terms, security materials, AI data practices if relevant.
- Litigation and disputes: Claims, threatened claims, demand letters, regulatory inquiries.
How to prepare
Start by making the cap table match the documents. Then make the documents match the story. Diligence gets painful when every answer creates three new questions.
Founders should also separate "missing" from "bad." A missing approval can often be ratified. A bad commercial restriction buried in a customer contract may require negotiation or disclosure.
Diligence request list landed?
Nebo Legal helps founders build data rooms, respond to investor and buyer diligence, and clean up issues before they turn into price chips.
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When should a startup prepare for diligence?
Before fundraising, M&A conversations, or major enterprise sales.
Can diligence issues be fixed?
Often, yes. The earlier they are found, the more options the company usually has.
Alex Ravski is the founder of Nebo Legal, P.C., a former Foley & Lardner attorney advising startups on formation, financing, and cross-border deals.