Due diligence checklist: complete financial preparation for fundraising

To prepare the model and financial data for the file, consult our fundraising support. The legal clauses should be examined with your advice.

1. What is due diligence?

Due diligence is the complete audit that investors (VCs, business angels, funds) carry out before investing. It includes several dimensions: financial, legal, technical, commercial. We focus here on the financial side, which is often the most time-consuming.

Objectives of the financial DD:

• Check that the figures reported are accurate and auditable
• Understand the structure of costs and margins
• Evaluate cash flow and financing needs
• Validate forecasts and assumptions
• Identify financial risks

2. Financial documents to prepare

Mandatory documents:

• ☑️ Balance sheets : last 3 years (or since foundation)
• ☑️ Income statements : last 3 years, monthly/quarterly
• ☑️ Cash Flow Statements : 24 months history + 12 months forecasts
• ☑️ Table cap : Shares, options, ESOPs, percentages
• ☑️ 3 year forecast : P&L, balance sheet, cash flow (detailed)
• ☑️ Tax file : Tax packages, VAT declarations

Important documents:

• 📎 Audits / Certifications: audit reports available, relevant certifications
• 📎 Key customer contracts: Top 20 customers (recurring revenue?)
• 📎 Supplier contracts: Critical dependencies
• 📎 Cost analyses: Details of margins by business unit

3. Key analyzes to prepare

Beyond raw documents, investors want analysis that shows your understanding of the business.

Analysis 1: Unit Economics

• Customer acquisition cost (CAC) by channel
• Lifetime value (LTV)
• LTV/CAC ratio (target: >3)

Analysis 2: Runway and Burn

• Cash in bank
• Monthly burn (operational expenses)
• Runway = Months before cash runs out
• Break-even point (if applicable)

Analysis 3: Sensitivities / Scenarios

• Base case: Moderate growth, reasonable assumptions
• Upside case: +50% turnover, better retention
• Downside case: -20% turnover, reduced retention

To frame documents, responsibilities and review work, consult our support in financial due diligence.

4. Dataroom organization

Everything must be stored in a secure virtual dataroom (Dealroom, VDR, Citrix ShareFile).

Recommended folder structure:

• 📁 Financial Documents (balance sheets, P&L, forecasts)
• 📁 Cap Table & Equity (shares, options, dilution)
• 📁 Tax & Compliance (taxation, compliance, audits)
• 📁 Contracts & Legal (customers, suppliers, employees)
• 📁 Due Diligence Summary (executive summary, FAQs, questions answered)

Good practices:

• Clear versioning (v1, v2, etc.)
• PDF documents name explicit files
• Index with descriptions (a word page pointing to each doc)
• Granular access by role (lead investor vs other angel)

5. Timeline and planning

T-12 weeks: Preparation

• Accounting audit: check that the figures are correct
• Document compilation: bring everything together
• Writing forecasts: build credible 3-year forecasts

T-8 weeks: informal DD

• Seed conversations with business angels
• Feedback on forecasts / assumptions

T-4 weeks: Pitch + DataRoom

• Launch dataroom (restricted access first)
• Documents available for lead investor

T-0 (serious DD): 2-4 weeks

• Investors ask questions
• Complete audits
• Term sheet + DD completed = closing

6. Mistakes to avoid

• ❌ Forecasts too aggressive (reduce your assumptions by 30-50%, be realistic)
• ❌ Incomplete documents (if invoices are missing, prepare customer expectations)
• ❌ Poorly maintained accounting (< 1 year history: major problem)
• ❌ Mixed business secrets (sensitive dataroom: NDA documents)
• ❌ No CFO available to answer questions: appoint a dedicated expert

Conclusion

A consistent data room limits requests for clarification. The timing of the fundraising also depends on the investors, the advice and the points to be resolved.

Iter Advisors supports the financial preparation of fundraising: making accounts more reliable, forecasting and responses to investors. The scope and timetable are defined after diagnosis.

FAQ — Due diligence and fundraising

How long does it take to prepare financial due diligence?

Preparing a full financial due diligence requires 4 to 8 weeks if your accounting documents are already in order. Without your own accounting record, allow 10 to 12 weeks. The critical phase: gather 3 years of balance sheets, income statements and cash flow tables, then construct a 3-year forecast that can be audited by an external investor.

What documents do VCs systematically request for due diligence?

The minimum list that any VC fund requires: certified 3-year balance sheets and income statements, up-to-date cap table with BSA/BSPCE, 3-year P&L forecast + cash flow (with detailed assumptions), contracts for 5 to 10 clients representing 80% of turnover, debt amortization table, and KYC report on the founders. A well-structured data room facilitates the review of documents without guaranteeing the closing time.

What is the role of a Fractional CFO during due diligence?

The part-time financial director plays three roles during due diligence: (1) it audits historical figures and detects anomalies before investors find them; (2) it constructs the forecast with defensible hypotheses and a sensitive model; (3) it answers financial questions from VCs and their accountants. At Iter Advisors, our supported clients have raised more than €100 million since 2021.