Manage Due Diligence on Your Terms the Right Way

9 min readApr 19, 2023

Fact: investors need information to make investment decisions.

Every investor ever has passed on one of my deals of the years 👍

Good investors have a clear process and will happily walk you through how deals get done at their firm.

Processes can range from trivial due diligence to comprehensive reviews of the market, technology and intellectual property, customer contracts, legal standing, competitive positioning, and beyond.

The process will depend on your stage and the investors you are talking to.

But here are some things that I have found very useful when running a streamlined due diligence process with multiple funds simultaneously.

What information to share and when?

From the first introduction to an investor until the moment wires hit the bank, fundraising is a journey intersecting bidirectional courtship, storytelling, sales process, and calculated admin/organization.

Over the course of the journey, your job is to find the best investor for your business, help them see and understand the opportunity you see, and provide them the data they need to evaluate that opportunity through their own lens.

You’ll meet investors who have looked at your space and your competitors closely for many years. And you’ll meet others who have spent little to no time thinking about the specific problem you’re solving for your customers. And you’ll find everything in between.

When I meet a new investor, it’s most frequently via an email introduction from another founder or someone in our network. The first thing we share at that moment is a pitch deck we’ve designed specifically to be helpful when read offline without needing any talk track.

Sharing a “self-serve” deck in advance does a few very useful things:

It allows the VC to politely opt out of taking a meeting if they don’t see a good fit for their fund. Your time is the scarcest resource, and good investors don’t waste founders’ time if they know upfront they’re not going to invest for whatever reason.
It gives the VC all the baseline information about your product, who your customers are, where you are in terms of traction/growth, etc. Ideal VCs will have read your deck before you meet them, yielding more productive meetings with less pageantry and more meaningful conversation to move your deal forward.

The level of detail in your “sharable” pitch book should depend on context–perhaps most importantly on your stage. i.e. you can include “less” if you’re out raising your seed round vs. if you’re further along out for a bigger round. High level, your slides should aim to cover/address:

Problem: what are you solving?
Customer: who has the problem?
Solution: what would a full solution look like?
Product: what is your version of the solution?
Team: who are you (in relation to this problem/solution specifically)?
Opportunity: how many customers have this problem?
Why now: why is today a particularly interesting moment to work on this?
Business model: how do you make money (ideally in simple math)?
Traction: where are you as a company (ideally in simple metrics)?

One thing I see seed-stage companies struggle with is the traction slide. If you are super early, that’s OK. All big companies began as small companies. Don’t overthink it. You saw enough of…well, something, to quit your job and start the company. Talk about what you saw!

No paying customers yet? Talk about users. Pre-users? Talk about invite-only beta signups. Lots of love on Hacker News or Product Hunt? Shout those wins from the rooftops in your traction slide…those are huge early wins in the right context! (an aside: Thoropass is actually Launching on Product Hunt today..would love you to check it out!)

Audience, reach, signups, users, repeat user actions, dollars, and cents. There are many ways to get excited about a very early stage company. Close the laptop and get on the whiteboard and write down first in words what got you to incorporate the biz and then convert that story into numbers.

Send the dang pitch deck, and don’t ask for NDAs

Asking a VC to sign an NDA before you meet them or share any information about your company is a rookie move.

Share your pitch book unless you have a reason to keep basic information under lock and key. To get an investor to pass or write you a check as fast as possible, you must give them at least some information.

VCs live and die by reputation. Good investors aren’t trying to steal your roadmap to sling to your competitors. It’s pretty easy to create a pitch deck with enough information to be truly useful for a new investor getting up to speed. But not so much information that you’d regret it in a serious way if it got into the hands of a competitor.

Build the deck to tell your story properly, and leave out the slides that you wouldn’t want “out there in the wild.” We leave out the roadmap, hiring plans (especially any named/planned hires), detailed business strategy, and current pipeline, for example. Your list may be different from ours, and that’s ok.

We maintain two decks:

One that gets sent to new investors we meet, and;
Another with a sizable number of additional slides in the appendix that we do not send out until an investor is clearly interested and needs those other materials further down their DD process.

A few investor convos are moving along — what do I share now?

We try to stick to a few principles when opening up more DD materials to prospective investors keen to spend more time:

Make sure we are running one process vs. running ten separate and unique processes with ten different funds. That’s a huge time suck, and you want to avoid that.
Be clear with your timeline and proactively make sure you know what investors need to stay on the same track
Stay up to date with investors’ timelines and know what each of their next steps is
Deals are not a fit for all investors. Ensure you see and fully understand the reasons behind all passes

Some investors will need more information about your market than others. Each fund will have different questions.

So how do you ensure you’re running one and not ten processes if all investors you’re spending time with are asking you for different metrics and different DD materials? Great question.

Apply the 80/20 rule. Look for patterns of questions on every call you have. Compile all your notes, and identify the overlap. Build slides for the 80% and forget about the 20%. Add the new slideware to the appendix of your pitch deck (the version you don’t send out initially.) And jump to those appendix slides on calls when topics come up.

Keep track of which data you’ve given to which investors

It can be challenging to remember which investors you spent time on go-to-market with and which you spent more time on your roadmap. Who was it that wanted to challenge market size assumptions again?

Fundraising processes with 6, 7, and 8 calls back to back to back can quickly become a blur.

Give yourself a little gift by keeping this stuff clear. Here’s how we do it:

Create a folder in Dropbox or Drive called “Series B Dataroom”
Inside that folder, create a “master DD” with empty subdirectories for critical diligence materials

Each time you put a first call or first meeting with a new investor on the calendar, copy/paste this entire folder and rename it to identify specifically as related to whoever this new investor is.

Use each investor folder to store whatever materials you shared either via screen share or shared via email after your call.

Insist on a “5 min call” to walkthrough materials

As you work each VC through your process, investors you’re talking to will ask questions like:

“Can you share your cap table”
“Can you share more about your roadmap”
“Can you send over some go to market funnel metrics?”

When asked for “THING_X,” your answer should be either:

“Happy to talk through that THING_X, sure. But we don’t have materials specifically prepared for that question. We’re trying to build out materials that most investors we’re talking to are asking us for. And nobody has asked us for this. Again, happy to hop on a call to talk about it. But no. I won’t send you THING_X because it’s not part of the materials we are building out.
“Yes. I have THING_X and am happy to share it. Let’s hop on a 5 min call, and I will walk you thru THING_X. It’ll just take 5 mins. Here’s a zoom link: {{zoom link}}”

And if (B) then get on the phone, share your screen, explain THING_X. Get them to repeat the main “takeaway” you just walked them thru in their own words. Then hang up and email them a copy of THING_X and add it to that VC’s dataroom (i.e., “RocketVC-DD” in the above example).

Doing this will ensure you’re not doing random homework for this VC and that VC. You have a business to run, after all. You are happy to share DD materials that align with what all the other investors consider essential. But you can’t and won’t be doing hours of extra materials prep just for one fund.

Another reason to take this level of admin/organization seriously is that you need the VC to give you the 5 mins so you can walk them thru whatever piece of DD material you are about to share with them. If they want your open sales pipeline, head-to-head win rates, or roadmap, well, great! But they will give you 5 minutes so you can explain it to them.

Get on the phone for 5 minutes and ensure they understand what it all means. Otherwise, they will make up their own story which will likely be wrong and almost certainly won’t be the compelling story you are working hard to build with them.

And lastly, if you do all this, you have covered your bases far more thoroughly than any upfront NDA. This will keep investors on the same page and tracking to the same timeline. You keep your sensitive materials in your hand until investors show you that they are interested in your deal and not just on a fishing expedition to learn about your space or, worse, to help them price a deal with your competitor.

Summing it up

We’ve found this system incredibly valuable to keeping the process efficient and pacing as close to our desired timeline as possible compared to entertaining vision quests for each VC independently.

That path tends to drag on when finding yourself yourself in a ”give a mouse a cookie situation.” That’s the old adage that says if you give a mouse a cookie, he’ll probably ask for a glass of milk. And when you give them a glass of milk, they’ll for a straw (and so on and so forth.)

Explaining your assumptions in real time allows them an opportunity to push and challenge. You’ll learn from that nearly every time. Talking thru metrics versus just sending them in a spreadsheet gives investors the critical context they need to understand specific nuances that tables can’t explain.

And VCs know you are busy. Most will do their best to respect your time and appreciate you articulating timelines, provided they are reasonable (nobody likes being bullied, rushed, or cornered, after all). As founders, we must also respect investors’ time and their need to run their DD process. But like any great business relationship, there’s a way to make these pieces all fit together so that everyone can get behind.

These are just some things that my cofounders and I have found helpful to us. Hopefully, some of this can be useful to other founders out there gearing up for their next raise. And email us anytime if you want to talk about, well, any of this stuff, really. We’re around 👍

‼️Remember: you are the one selling the valuable thing to the VCs, not the other way around!!

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