A due diligence in a VC funding round is not only an examination of the numbers. It tests whether a company is structurally ready to deploy the capital productively. Most founders underestimate the scope and start preparing too late. This checklist shows what investors systematically assess in financial, legal, tax and commercial due diligence, and what you need to prepare as a founder before the process begins.
Financial due diligence: the numbers behind the numbers
Financial DD goes far beyond the annual financial statements. Investors want to understand how the numbers are built, whether they are reliable and what they say about the future.
Mandatory documents for the data room
- Annual financial statements for the last three years (HGB) including notes and management report
- Monthly management accounts (BWA) for the last twelve months
- Current trial balance (Summen- und Saldenliste)
- Three-statement financial model (P&L, balance sheet, cash flow) with planning assumptions
- Cap table with all shareholdings, VSOP pools and convertible loans
- Overview of existing financing instruments (loans, convertible notes, grants, KfW programmes)
- Receivables list with ageing structure and default history
- Revenue breakdown by customer, product and region
What investors look at most closely
- Revenue quality: One-off effects vs. recurring revenue. An investor who values ARR wants to understand which share of revenue is contractually secured.
- Unit economics: Customer acquisition cost (CAC), lifetime value (LTV), payback period. If these numbers are not cleanly available, it signals a lack of finance maturity.
- Cash conversion: How quickly does revenue turn into cash? Long receivables cycles or negative working capital dynamics are red flags.
- Consistency of planning assumptions: Does the financial model align with historical performance? Assumptions that break with the past need exceptional justification.
Legal due diligence: corporate law and IP
Legal DD examines whether the company is set up cleanly from a legal perspective and whether the ownership structure can withstand an investment.
- Current articles of association (Satzung) including all amendments
- Current commercial register extract (Handelsregisterauszug)
- Shareholder list and shareholder resolutions
- Existing investment agreements and shareholders' agreements
- VSOP/ESOP programmes with all related agreements
- Material customer contracts (top 10 by revenue)
- Supplier contracts with dependency risk
- IP registrations: patents, trademarks, domains
- Employment contracts of management and key employees
- Pending or threatened litigation
Tax due diligence: German specifics
Tax DD carries particular weight in Germany because the regulatory complexity is higher than in many other startup ecosystems.
- Tax assessments and audit reports for the last three to five years
- GoBD compliance: process documentation for all bookkeeping-relevant IT systems
- E-invoicing compliance: receipt capability (mandatory since 2025), issuance obligation (from 2027 for companies above 800,000 EUR revenue)
- Loss carry-forwards: balance, usability and risks from share transfers (§ 8c KStG)
The tax details, from VAT cut-off to transfer pricing documentation, belong with your tax advisor. From a CFO perspective, what matters is that the tax documentation is complete and structured in the data room before the investor asks.
Commercial due diligence: market and business model
Commercial DD assesses market position and the scalability of the business model. It is less document-driven and more analysis and interview based.
- Market analysis: total addressable market (TAM), serviceable addressable market (SAM), serviceable obtainable market (SOM)
- Competitive analysis with clear positioning
- Customer structure: concentration risk (top 5 customers as a share of total revenue)
- Pipeline overview with conversion rates and average deal size
- Churn analysis (for SaaS/subscription models): logo churn, revenue churn, net revenue retention
- Reference customers for investor calls (with prior alignment)
The role of the fractional CFO in DD preparation
Due diligence is the moment when it becomes visible whether a company's finance structures hold. A fractional CFO prepares this moment long before the investor opens the data room:
- Financial model and equity story: The three-statement model not only has to be correct mathematically. It needs to tell a consistent story. Investors check whether planning assumptions match historical performance. An experienced CFO builds the model so that it withstands questions.
- Data room structure and completeness: Folder structure, naming, version control. These are the details that professional investors immediately read. A fractional CFO knows the expectations from experience and builds the data room the way investors expect to see it.
- KPI reporting and unit economics: CAC, LTV, payback period, net revenue retention. These numbers must not only exist. They have to be consistent, traceable and trackable across multiple months. That is build-up work that begins months before the DD.
- Coordination with tax advisor and lawyer: The CFO orchestrates the process, the tax advisor delivers tax documentation, the lawyer the legal side. Without someone holding the full picture, gaps emerge between disciplines.
- Internal mini-DD: The most valuable step is running your own due diligence before the investor does. What questions would a critical examiner ask? Where are documents missing? Where are the numbers inconsistent? A fractional CFO brings the outside perspective founders need at this stage.
The most expensive due diligence mistakes do not happen during the DD. They happen in the months before. A financial model built under time pressure, a cap table that only gets cleaned up during the process, reporting that has to be set up from scratch for the investor. All of that costs time, valuation points and negotiating power. DD preparation begins on the day you decide to raise.
The 12-week preparation timeline
The best due diligence is the one that produces no surprises. Founders who start twelve weeks before the expected DD can close structural gaps without explaining them under time pressure.
| Week | Focus | Outcome |
|---|---|---|
| 1–2 | Set up data room, build document list | Structured data room with folder hierarchy |
| 3–4 | Financial documents: BWAs, annual statements, financial model | All core financial documents complete |
| 5–6 | Legal documents: contracts, IP, corporate law | All legal documents reviewed and complete |
| 7–8 | Tax compliance: GoBD, e-invoicing, tax assessments | Tax documentation complete |
| 9–10 | Commercial: market analysis, pipeline, reference customers | Commercial data foundation in place |
| 11–12 | Internal mini-DD: dry run through investor lens | All open questions identified and closed |