It's broader than just "are the numbers accurate"
Financial due diligence for a funding round isn't only about verifying historical figures — it's about assessing whether the business's financial story holds together and whether the numbers support the growth narrative being pitched.
What typically gets scrutinised closely
- Revenue quality — is revenue recurring and diversified, or concentrated in a few large, potentially unstable customers?
- Unit economics — do the numbers behind customer acquisition cost, lifetime value, and margins actually support the growth plan being pitched?
- Cap table cleanliness — are all prior fundraising rounds, ESOP grants, and convertible instruments properly and consistently documented?
- Statutory compliance history — GST, TDS, ROC filings, and PF/ESI compliance, since gaps here are a recurring source of diligence delays
- Related-party transactions — anything involving founders or their other entities gets extra scrutiny
- Contingent liabilities — pending litigation, tax notices, or guarantees that aren't obvious from the balance sheet alone
What commonly slows a diligence process down
- Financial records that aren't reconciled or consistently maintained month to month
- A cap table maintained informally rather than through a proper instrument-by-instrument record
- Related-party transactions that weren't documented or approved at the time
- Founders unable to quickly produce historical statutory filings when requested
How to prepare well before you're in a live process
The businesses that raise fastest are usually the ones where clean books, a well-maintained cap table, and organised statutory records were already a habit before the fundraise started — not something assembled hastily once term sheet conversations begin. A data room prepared in advance, even loosely, saves real time once diligence formally starts.
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