due-diligence-checklist

name	Due Diligence Checklist
description	Run structured commercial, financial, technical, and legal diligence.

Due Diligence Checklist

Diligence is about disconfirming the thesis, not confirming it. The goal is to find the reason not to invest before you wire the money. This skill structures the four workstreams and the killer questions in each.

Mindset

Enter assuming the deal is flawed and look for the flaw. Confirmation bias kills returns — founders are persuasive and decks are polished. Diligence is where you earn your skepticism.

1. Commercial Diligence

The market and the right to win.

• Market: real size (validate the TAM bottom-up, see market-sizing), growth rate, and whether timing is right.
• Customers: talk to real ones. Why did they buy, would they recommend, what would make them leave? Reference calls are the single most informative step.
• Competition: who else solves this, and why this company wins.
• Moat: what protects the business as it scales (see competitive-moat).
• Unit economics: CAC, LTV, payback validated from raw data, not the deck.

2. Financial Diligence

The numbers behind the story.

• Reconcile reported revenue to bank statements and contracts — confirm it is real, recurring, and recognized correctly.
• Quality of revenue: concentration, churn, contract length, one-time vs recurring.
• Burn rate and runway; the real cash position.
• The forecast's assumptions — are they grounded or aspirational?
• Cap table: ownership, option pool, any unusual preferences or debt.

3. Technical Diligence

For technology investments.

• Architecture scalability and key technical risk.
• Code and infrastructure health; tech debt that will slow the roadmap.
• Security and data-handling posture; compliance exposure (privacy, regulated data).
• Team's engineering depth and key-person risk.
• IP ownership — confirm all code is assigned to the company.

4. Legal Diligence

The structural landmines.

• Clean incorporation and cap table.
• IP assignments signed by all founders, employees, and contractors (a frequent gap that can sink a deal).
• Material contracts and any change-of-control clauses.
• Litigation, regulatory issues, outstanding liabilities.
• Employment compliance and any co-founder disputes.

Synthesis

• Score each workstream and list every red flag found.
• Distinguish deal-killers (fraud, broken cap table, no real moat) from manageable risks (fixable with a board condition or a covenant).
• Tie findings back to the original thesis: does it still hold?

Red Flags

• Revenue that will not reconcile to cash.
• Unsigned IP assignments or contested ownership.
• Customer concentration above ~25% in one account.
• Founders evasive on a specific topic — follow the evasion.

Deliverable

Produce a diligence report: findings by workstream, a red-flag register split into deal-killers vs manageable risks, the validated unit economics, and a go / no-go recommendation tied to the original investment thesis.