Deals die in diligence more than in negotiation — not from fraud, but from friction: the missing PAS-3, the unstamped founder agreement, the GST mismatch that takes three weeks to explain. Investors read a messy data room as a preview of how you run everything. The preparation paradox: diligence is the one part of fundraising entirely within your control, months in advance. Here is the checklist to build against, and the red flags to cure before anyone looks.
Corporate and cap table (the deal-breakers live here)
- Incorporation set: COI, MOA/AOA (current, consolidated), statutory registers, minutes books — real ones
- Cap table: every allotment's paper trail (board/shareholder resolutions, PAS-3s, share certificates, valuation reports), ESOP scheme + grants register, any SAFEs/CCDs with conversion math
- Founder documents: founders' agreement, IP assignments (including pre-incorporation work), vesting schedules
- Prior round docs: SHA/SSA, side letters, investor consents for this round per those documents
- The classic defects: shares issued without filings, unstamped transfers, phantom co-founder holdings, ESOPs promised on WhatsApp — every one curable now, expensive at deal-speed
Financial and tax
- 3 years (or since inception): audited statements, monthly MIS, bank reconciliations
- Revenue proof: invoices-to-bank mapping, cohort/retention data behind claimed metrics, revenue recognition policy (deferred revenue treated honestly)
- GST: returns filed, 2B/books reconciliations, notices closed; the GST-turnover-vs-books tie-out investors' analysts run first
- Income tax and TDS: filings, 26AS matching, assessments status, transfer-pricing where group entities exist
- Statutory dues: PF/ESI/PT current — unpaid employee dues are the diligence finding that reprices deals
Whatever the pitch deck claims — ARR, GMV, burn — build the written bridge from those numbers to books and bank statements before diligence starts. The single most damaging pattern is metric inflation discovered by analysts: not fraud exactly, but 'annualised best month' arithmetic that costs founder credibility precisely when terms are being finalised.
Legal, IP and contracts
- IP: trademark filings/registrations in the company's name (not the founder's), domain ownership, code/content assignments from every contributor — employees, freelancers, agencies
- Material contracts: top customer and vendor agreements (change-of-control clauses flagged), platform dependencies, leases
- Licences per your sector: FSSAI, DPIIT recognition, RBI/IRDAI/sector registrations — valid and in the entity's name
- Litigation and notices: everything pending, threatened, or settled — disclosed with status notes (disclosed problems are manageable; discovered ones are deal risks)
- Data & privacy: DPDP-readiness, privacy policy reality-check versus actual data practices
People and the story's consistency
HR files (offer letters, employment agreements with IP/confidentiality clauses, ESOP communications), contractor agreements, key-person dependencies and any founder-adjacent related-party arrangements (family on payroll, founder-owned premises on rent — fine when papered and priced, findings when discovered). Then the meta-layer: consistency — the deck, the data room, the GST portal and the bank statements must tell one story. Diligence teams triangulate; divergence anywhere infects trust everywhere.
Building the data room
Structure it as the checklist above (investors' request lists follow the same taxonomy), one indexed folder per head, documents named intelligibly, a master index sheet, and a single owner internally who tracks every request with dates. Run a self-diligence a quarter before raising: your CA/CS walks the checklist as a hostile reviewer, defects get a cure plan (many — filings, stampings, assignments — cure in weeks), and known-uncurables get honest disclosure notes prepared. Founders who do this close in 4–6 weeks of diligence; founders who don't discover their own company in real time, with an audience.
How Aidwish helps
Aidwish runs pre-raise diligence readiness — the self-audit, defect cures (filings, registers, IP assignments), metrics-to-books bridges and data-room assembly — so investors' scrutiny confirms your story instead of testing it.