How should you prepare for due diligence?

Sarah Lerche / November, 2017


Sarah Lerche, President, CFO Services at Escalon explains from the financial side what you would need to have prepared and ready when it’s time for due diligence.

Video Transcript

How should you prepare for due diligence?

Every startup is going to go through due diligence fairly rapidly. I call it good corporate hygiene. Every founder should start with that. The more they do themselves early for the better because otherwise, you’re going to be paying people to chase down agreements that weren’t signed. What I would recommend is that, as a founder, start making sure that every contract you sign you have the fully executed version.

Making sure that you are up-to-date with your filings, your registration, your tax, your books should all be up-to-date, and ready in an organized manner. There are so many tools today where you can do everything in the cloud. You can easily invite during due diligence your potential investors in there.

Put a little bit of thought into a routine and keep that routine, which I think is just like a new year resolution good intentions, hard to keep. From the financial accounting side, you do want to have up-to-date gap financials, a copy of all contracts, signed NDAs, employee letters, PIIAs, which is the inventions agreements that you have all your contractors or employees sign. You would want to have all your articles of incorporation, board minutes, cap tables, everything that has to do with the establishment of the organization, any liabilities and ownership all of those things needs to be in order when you have your due diligence.

A lot of founders and early stage companies underestimate the amount of administrative work it is to keep your company healthy and ready for due diligence. With administrative work, I mean everything from making sure your cap table is up-to-date, your agreements are signed, as well as your NDAs, your contracts, your general hygiene, your financials, your tax, your reporting etc.

If you are in San Francisco, for example, the City of San Francisco requires extra reporting if you are based there, and taxes as well, versus if you are in Palo Alto or San Jose. There is a lot of quirky things that is a lot of peoples’, not favorite work to do, but is still important to not underestimate budget both time and resources to make sure that you are up-to-date and ready for investors as well as not being surprised by anything, and that you have control of your company.



  • Sarah Lerche, Escalon
  • November, 2017
  • 2:59
  • Finance & Operations, Finance

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