Term Sheet is Just the Beginning
You got a term sheet. Champagne! But 20% of deals die in due diligence. Prepare or lose the deal.
The 47 Documents
Phase 1: Corporate & Legal (12 docs)
- 1. Company bylaws (up-to-date)
- 2. Certificate of Incorporation
- 3. Board meeting minutes (last 3 years)
- 4. Shareholders' agreement
- 5. Cap table (ESOP, options, SAFEs)
- 6. Founders' contracts
- 7. IP assignments (patents, trademarks, code)
- 8. Licenses and authorizations
- 9. Insurance (D&O, liability)
- 10. Ongoing or potential litigation
- 11. Key supplier contracts
- 12. Major client contracts
Phase 2: Finance (15 docs)
- 13-15. Balance sheets, P&L, 3-5 year forecast
- 16-18. Cash flow, burn rate, runway calculation
- 19-21. MRR/ARR detail, cohort analysis, unit economics
- 22-27. Cost breakdown, pricing history, debts, tax filings
Phase 3: Product & Tech (10 docs)
- 28-32. Technical architecture, stack, API docs, roadmap, metrics
- 33-37. Code review, security tests, GDPR compliance, SLA, tech debt
Phase 4: Team & HR (10 docs)
- 38-42. Org chart, CVs, employment contracts, salary grid, hiring plan
- 43-47. ESOP policy, NDAs, IP assignments, background checks, references
Red Flags That Kill Deals
Cap table chaos
Undocumented SAFEs, departed founder with 30% (no vesting)
IP not clean
CTO coded before joining = code legally his
Numbers don't match
MRR in pitch ≠ MRR in accounting
Timeline
- Week 1-2: Data room setup + corporate docs
- Week 2-3: Finance deep dive + calls
- Week 3-4: Tech due diligence
- Week 4-6: Legal review + final negotiation
- Week 6-8: Closing (if all goes well)
📋 Prepare Your Data Room
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