Guide · EasyCofounder
Due diligence and the data room: preparing for investor checks
After signing a term sheet, many founders discover they are missing documents, signatures or assignments of rights. This guide sets out what investors check, how to build a clear data room and which problems to fix well before you start raising money.
Updated on 5 min readBy the EasyCofounder team
In short
- Due diligence is the set of checks an investor runs before finalising an investment.
- It covers legal, financial, employment, technical and commercial matters, through an organised online data room.
- A complete, consistent data room speeds up the round and avoids renegotiating agreed terms.
Contents
What is startup due diligence?
Due diligence means the investor checking that the reality of the business matches what they were shown, and identifying the risks that could affect the value of their investment.
Its scope depends on the stage. At pre-seed, a business angel is often satisfied with a few key documents and conversations with the founders, while a fund leading a larger round may instruct lawyers and specialists to carry out an in-depth review.
It usually takes place after the term sheet and before the final documents are signed. Its findings can lead to additional warranties, conditions precedent or, in serious cases, the deal being abandoned.
What do investors check?
| Area | Examples of points reviewed |
|---|---|
| Legal | Articles of association, shareholders’ agreement, shareholder decisions, share register, major contracts, disputes |
| Equity | Cap table, BSPCE, BSA, BSA AIR (French stock options, warrants and convertibles), promised shares, founder vesting |
| Intellectual property | Ownership of the code, the brand and the domain name, assignments of rights from contractors |
| Financial | Accounts, forecast, cash position, debts, public grants and their conditions |
| Employment | Employment contracts, status of the directors, freelance contractors, reporting obligations |
| Technical | Architecture, security, dependencies, technical debt, ability to scale |
| Commercial | Customers, contracts, usage metrics, revenue concentration |
| Personal data | Record of processing activities, privacy policy, processors |
How do you build a clear data room?
A data room is a secure sharing space, organised into numbered folders, that lets investors consult documents without endless email exchanges.
- 1Choose a sharing tool that lets you manage access person by person and revoke access at any time.
- 2Create a simple folder structure that follows the areas of due diligence, with an index at the top.
- 3Give every file an explicit, dated name, in PDF for signed documents.
- 4Add a short summary note at the start of each folder to flag any particular points.
- 5Open access gradually: general documents first, sensitive information after the term sheet.
- 6Keep a log of the questions asked and the answers given.
- Up-to-date articles of association, company registration extract and minutes of shareholder decisions.
- Shareholders’ agreement and a cap table that matches the share register.
- Employment contracts, service contracts and assignments of intellectual property rights.
- Trademark filings, domain names and proof of ownership of the code.
- Annual accounts, cash position, business plan and financial forecast.
- Main customer and supplier contracts, general terms and conditions.
- Documents relating to public grants and loans received.
- Documentation on personal data and security.
Which problems should you fix before raising money?
The best preparation starts months before the round, because some fixes take time and need signatures from people who are no longer around.
- Have the developers, designers and contractors who worked on the product sign assignments of rights, as explained in our guide to protecting your startup idea.
- Formalise in a written decision any grant of shares or BSPCE that was promised verbally.
- Regularise the position of a co-founder who has left, by applying the agreed clauses or negotiating a buyback.
- Put in place a shareholders’ agreement and founder vesting if they do not already exist.
- Register the main trademark and check who owns the domain names.
- Update the documentation on personal data and security.
During due diligence, a startup discovers that the first version of its app was built by a freelancer with no assignment of rights. The investor puts the signing on hold until it is fixed, which takes several weeks because the contractor is hard to reach.
How do you get through due diligence well?
Answer quickly, precisely and in writing: a vague or late answer creates more concern than a problem that has been identified and explained.
- Appoint one founder to handle the exchanges, to avoid contradictory answers.
- Flag sensitive points yourself, with a proposed solution, rather than letting the investor discover them.
- Never send a document that was altered after the fact or is incomplete without saying so.
- Keep the business moving, because due diligence should not take up the whole team.
Frequently asked questions
How long does due diligence take?
It depends on the stage, the size of the round and how well prepared the startup is. A complete data room from the outset shortens it considerably, while missing documents or fixes can add several weeks.
What is a data room?
It is a secure online sharing space, organised into folders, in which the startup makes its documents available to investors during the checks, with access controlled person by person.
Does a business angel carry out due diligence?
Yes, often more lightly than a fund. They will at least ask for the articles of association, the cap table, any shareholders’ agreement and some financial information, and they pay close attention to the team and to market evidence.
When should you prepare your data room?
Ideally before approaching investors, keeping it up to date as you go. That lets you fix problems without pressure and answer quickly once the term sheet is signed.
Glossary
- Due diligence
- The set of checks carried out by an investor before finalising an investment.
- Data room
- A secure sharing space in which the company makes its documents available to investors.
- Assignment of rights
- A contract by which the author of a creation, such as code or a logo, transfers their rights to the company.
- Warranties
- Commitments made by the company or the founders in the investment agreement about the accuracy of the information provided.
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Further reading
- Negotiating a term sheetThe startup term sheet: economic and control clauses, what is actually binding, the points worth negotiating and the steps through to closing.
- Building your cap tableA startup cap table: what it contains, how to build it and keep it up to date, diluted vs fully diluted views and the mistakes that worry investors.
- Protecting your ideaCan you protect a startup idea? Copyright, trademarks, patents, proof of date, non-disclosure agreements and assignments of rights between co-founders.
- Shareholders’ agreementShareholders’ agreement: what it is for, how it differs from the articles of association, common clauses between co-founders and when to sign it.
About this guide
This guide was written by the EasyCofounder team — a platform that connects founders, talents and startups — and was last updated on November 9, 2026. It draws on common startup practice and on the questions our members ask.
How we write, review and update our guides is explained on our About page.
It provides general guidance and is not legal, tax or financial advice. For your own situation, consult a qualified professional (lawyer, accountant) and the official resources available in your country.