Due diligence (DD)

How it works

DD happens after the term sheet is signed but before the round closes. It typically includes: customer reference calls, financial audit, code/security review, legal incorporation and IP check, and management reference calls. Surfaced issues in DD can re-open the term sheet or kill the deal. Strong founders have their data room ready before DD starts.

Related terms

• Term sheet
  A term sheet is a non-binding document outlining the key terms of a proposed investment — valuation, amount, board seats, liquidation preference, anti-dilution, and other rights.
• Data room
  A data room is a secure online folder where a startup shares confidential documents (financials, contracts, cap table, employee info) with investors during due diligence.