Creating a Due Diligence Roadmap for Series B Investors •

I wrote before on the “holy trinity” of materials startups should have in their Series B data room: memo, deck, and forecast. These three key documents should do the heavy lifting to grab attention and communicate high-fidelity information about the partnership.

Now I want to highlight how founders can tie these materials together for investors. When done right, these materials, along with several phone calls and presentations, will provide the blueprint and backbone for an in-depth Series B due diligence process.

This blueprint is important because someone will probably read every single document in your data room and you don’t want them lost. Instead, you want to make their job really easy. The following set of materials is fully covered by the “minimize work” objective. By making things easy, you increase the likelihood that the outcome will be in your favor.

Series B companies generally have sales, detailed cost statements, forecast update records, patents, board presentations, and more. There is a lot of information to peruse because you’ve been around much longer than an early stage or Series A company.

The best offense is a strong due diligence questionnaire

Don’t complicate your data room so much that investors can’t get out of the details to accept your arguments.

As an investor, I am shocked that I don’t see DDQs more often. Not to be confused with a legal DDQ, this DDQ is often a 60 to 80 page document divided into sections and answering questions investors will always ask.

Some questions will be clear. For example:

  • When and how was the company founded?
  • Discuss the company’s vision and values.
  • How many employees does the company currently employ?
  • Summarize the relevant expertise and experience of the management team.

The DDQ provides a good reference guide for such simple questions. It should also include some preventative questions that investors like to ask, such as:

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