Due diligence is the process through which investors verify whether a startup is legally compliant, financially sound, and operationally prepared for investment. The objective is to identify:<\/p>\n
Investors want confidence that the company is legally incorporated, founders own the business they claim to own, financial records are accurate, intellectual property is protected, and regulatory compliances are up to date. A well-prepared startup often experiences faster funding closures and smoother negotiations.<\/p>\n
Certificate of Incorporation, MOA, AOA, PAN & TAN, GST registration (if applicable), Startup India recognition (if applicable), CIN details and registered office proof.<\/p>\n
Current cap table, share certificates, register of members, ESOP details, shareholder agreements, share transfer records and previous funding documents.<\/p>\n
PAN, Aadhaar, passport (if applicable), DIN, employment agreements, non-compete agreements and confidentiality agreements.<\/p>\n
Board meeting minutes, shareholder resolutions, AGM records, ROC filings, statutory registers and director disclosures.<\/p>\n
Audited financial statements, Profit & Loss Account, Balance Sheet, Cash Flow Statement, Trial Balance, General Ledger, bank statements, budget projections and the financial model.<\/p>\n
Income Tax Returns, GST returns, TDS returns, advance tax records, tax assessments, outstanding notices and payment challans.<\/p>\n
Revenue recognition, expense classification, related-party transactions, loan documentation, fixed asset records and inventory records (if applicable).<\/p>\n
Trademark registrations, patent applications, copyright registrations, design registrations, domain ownership, software ownership documents and IP assignment agreements.<\/p>\n
Customer agreements, subscription agreements, purchase orders, vendor contracts, MSAs and SLAs.<\/p>\n
Employment contracts, salary structure, payroll records, ESOP agreements, PF & ESI compliance (if applicable) and consultant agreements.<\/p>\n
Shops & Establishment registration, Import Export Code (IEC), professional tax, industry-specific licenses, environmental and sectoral approvals.<\/p>\n
Pending court cases, arbitration matters, tax disputes, employment disputes and regulatory notices. Transparency builds investor confidence.<\/p>\n
Privacy policy, terms of service, cybersecurity practices, data protection policies, software licenses and cloud agreements.<\/p>\n
Business model, revenue streams, customer acquisition, market opportunity, competitive positioning, unit economics and churn analysis.<\/p>\n
Angel investments, convertible notes, SAFE agreements, preference shares, valuation reports and share allotments.<\/p>\n
Organise a Virtual Data Room (VDR) to store all documents securely for investor access; conduct an internal due diligence review to resolve issues early; clean up the cap table; resolve pending ROC, GST, TDS and Income Tax filings; protect intellectual property; and prepare realistic financial projections.<\/p>\n
Due diligence is more than a compliance exercise \u2014 it is an opportunity to demonstrate that your startup is well-managed, transparent, and investment-ready. Founders who proactively organise legal documents, financial records, tax filings, intellectual property and governance records are better positioned to attract investors and close funding rounds efficiently. Before approaching investors, conduct your own due diligence review.<\/p>\n