Due diligence on a deal
One run per deal, as many at once as you have in the pipe. Notes, links and answers stay on that deal's run; what you change about the process, kept, is how the next deal starts.
- 1Write the thesis in one sentence
What has to be true for this to be a good deal. Every step below is a test of it.
- 2Send the request list
Today, in one message: incorporation papers, cap table, financials, material contracts, IP assignments. A list sent in pieces is a data room that arrives in pieces.
- 3Who owns what
Every SAFE, note and option grant on the cap table, and the cap table matching the documents.
- 4Who owns the code
Every founder and contractor has assigned their work to the company, including what they wrote before it existed.
- 5The numbers against the bank
Revenue in the model against money that arrived. A gap is a question, not yet a problem.
- 6Use the product yourself
End to end, before the next call. What it does on your phone outranks what the deck says it does.
- 7Call two customers they did not pick
Ask what they would use if it disappeared tomorrow.
- 8One reference on each founder
Somebody who worked with them, not somebody they gave you.
- 9Anything that would stop the round
Litigation, regulation, privacy, a dependency on one platform. Write it down even when the answer is none.
- 10List the red flags and what would clear each
A flag with nothing that would clear it is a pass dressed up as a question.
- 11Decide
Invest, pass, or one more question with a date on it. Written, with the reason.
Asks you first - 12What this deal taught the process
A step that was missing, one that was a waste of time. Keep it, and the next deal runs the better version.