“I don’t know if it happens to everyone, but I do get nervous. It’s like the day of the exam. Even if you know that you have studied, that you have done everything you could, I get that tickle in my stomach of the fear of the unknown. Did I make a mistake? Is there something I don’t know…?”
Jorge Lluch, Co-Founder of Abacum and Former CFO
These are the right feelings; they keep you sharp. Could you sail through a diligence round in the heady days of 2021 with a little more than a board deck and a lot of hand raising? Probably. Is that the same now? Definitely not. The diligence is more… diligent. And you don’t just want to “pass.” As a strategic CFO, you want to use the process to set up your company and investors for long-term success.
Like most things in fundraising, being unprepared costs you. Investors notice. That can lead to lower valuations, more friction, and ultimately less money for your team and existing investors.
In the last article, we talked about a consistent story. We started there because the story is the most important part of any raise. But the data room filled with numbers? They’re the proof. The financials need to reinforce the story you’re telling.
So start early. Build your data room. Test it. Share what is asked for.
It’s fine if everything isn’t perfect. That’s even expected. Just make sure you execute putting together a great data room.
The Bullets
|
1. Core Strategy Documents
You might wish your operational model was so transparent that you didn’t need a board deck. But the reality is that people love decks. So, make sure you are prepared to give your story in a format people respond to:
Vision statement and core values one-pager. Have a one-page document that shows who you are and what you believe. Tie this back to your history and trajectory. It’s the human side of your data.
Investment deck. Tell the story of where you’ve been and where you will go in typical deck fashion. Be clear about how the money will be used, the bets you’re making, and how long your runway lasts with their money.
TAM and market analysis. Make it clear who you are targeting and the size of the market. The top numbers should be in the investment deck, but it's nice to have an extra appendix for more detail. Of course, this analysis must tie directly to your R&D and GTM priorities.
Recent Board Decks. You should have this already, but feel free (after the NDA) to show how you’ve operated with your board. You want to demonstrate learning, agility, and speed.
Last Round Materials. Have these handy. Investors want to know what you promised last time and how you delivered. This adds credibility and gives a before-and-after snapshot.
These documents are the heart of your company in narrative form. They help investors answer a fundamental question: “Do I believe in this team and direction?”
Tip: Be direct, not pretty. People respond to straight truths, not how pretty a slide deck looks (trust me they all look pretty at this point).
2. The Operating Model
This model is the backbone for the rest of your raise. It’s not just a spreadsheet. It’s the financial expression of your strategy and the anchor of your diligence process. To tell the story right and align everything cleanly, make sure your operating model includes:
Key Metrics. Include all the critical metrics for your industry (e.g., ARR, CAC, LTV, CAC/LTV, burn/revenue). But make sure you clearly define them. Misinterpretation from fuzzy definitions is the fastest way to lose credibility in a diligence process.
Driver-based. Your model should be based on key drivers that allow you to stress test different assumptions or respond quickly when an investor asks, “What if?”
Full financials. This should go without saying: income statement, cash flow, and balance sheet, with full historicals (at least back to your first round) and a detailed forecast that all tie.
Scenario analysis. Build upside, base, and downside cases. Show investors you understand your risk. Flag trigger points that would drive cost changes or strategic pivots.
Department tabs. Include summary tabs for each major team (product, GTM, etc.). We’ll get into deep dives later, but this should clearly tie to your overall plan.
Index tab. Create a clean front page that links to all supporting models and documentation. You’ll save yourself (and everyone else) hours of back-and-forth.
This is the hub of your diligence. If you’ve built and maintained a great operational model, this shouldn’t be any extra work. If not, now’s the time to start. And once it’s done, keep it updated.
Tip: Control access. Use permissions and phase gating so each diligence step reveals only what’s needed at that point.
3. The Product Overview
Now it’s time to actually show what you’ve built. Remember, at the end of the day you are selling a product. Product demos are great, but you also want a self-contained package that gets people excited. Here’s what to include:
The ‘wow’ moment. Just like your customers, you want to get investors excited about the solution they are buying into. If they see what makes your customers excited, it will be much easier for them to conceptualize future success.
Loom videos and walkthroughs. Record product walkthroughs. A 3-minute Loom can make your value prop 10x more real than a bullet point ever could.
24-month roadmap. Yes, roadmaps are painful. But this needs to exist and align with your strategic docs and operating model. What are you building, and why will it increase sales, improve retention, or open new markets?
1-Pager on technical challenges and opportunities. Provide enough technical depth to build trust and this can serve as proof of why your company is special, why you have a moat.
Deployment history. This depends on your potential investors, but it can be helpful to pull from your CI/CD pipeline. Highlight velocity trends and point out what you didn’t ship as a sign of disciplined execution.
Give your investors the aha moment with your product. They will soon be telling everyone else what your product is doing, so make sure they can explain it clearly.
Tip: Make sure any future product work in this section is reflected in your hiring and headcount model. That alignment builds trust.
4. Customers and Pipeline
This is arguably the most critical part of your diligence. Who are you serving, how much are they paying, and what’s next? This means:
Full customer list. This should tie exactly to your ARR, cash collections, and payables. This serves as the foundation for your revenue.
Customer concentration. Make sure you show how much of your revenue is tied to top customers versus a diversified base. This allows investors to know any potential risk.
Top customer breakdown. Show use cases, tenure, and usage for your top 10 customers. Again, there is nothing to hide here. Be upfront and detailed with what is usually a very large part of your revenue.
Sales and marketing pipeline detail. What’s coming in the next couple quarters? How has the pipeline converted historically? Make sure this links directly to your operating model projections.
Customer health overview. Provide segmented usage or health metrics based on your internal lens. Dead or churning customers are fine as everyone has them, just be transparent.
The best practice is just to have your operating model driven by these figures, but If it’s not in the model, at least have this detail linked to supporting spreadsheets. For a full-deep dive, consider reviewing a full sales breakdown.
Tip: Be ready to provide references for your top 10 customers. Know in advance who’s glowing and who might raise red flags.
5. People and Execution
This section is a roll call but it’s also about showing that you can attract and retain great talent. At the end of the day, it's also your most important asset. You’ll need:
Current org chart. Include FTEs vs. contractors, location, and tenure. Investors are looking more at contractor risk so beware if you have a lot of contractors in one place doing nearly full-time work.
Open roles. List open positions and rank by priority. It’s even better if you have names that you are ready to sign once the round is closed.
Hiring plan. Lay out hiring plans that match your operational model. Where are you going to recruit from and how. This allows investors to see where your future talent will come from and will show your focus on not just hiring ‘anyone’ when you get the new funds.
Hiring and retention metrics. Share attrition rates and time-to-hire stats. These show your ability to scale efficiently.
Inevitably, you will also be asked how you use AI across your teams and systems. Again, just be ready to have the answer on hand.
Note: This must tie cleanly back to your headcount planning and model assumptions. For a full breakdown, see our in-depth analysis.
6. Legal Basics and Compliance
We’ll dive into investment structure in a future article, but for now, here’s the must-haves:
Cap Table and Pro-Forma. Make sure it’s clean with no mystery names. Then, show the impact of new money, option pool refresh, and pro-rata rights. Allow for ≤10% of round to go toward secondary if approved by the board.
IP and Licensing Docs. Include founder IP assignments and any key licenses.
Material Contracts. Put major contracts (customer and vendor) in one place. Highlight anything non-standard, such as an ‘unlimited support’ flag for a major customer.
Insurance Policies. Create a simple spreadsheet summary and link to policy docs. If anything’s missing, explain your plan to get the insurance.
SOC 2. If you don’t have it, show when you’ll get it.
GDPR Compliance Docs. Include vendor, customer, and PII policies.
Pen Tests and Risk Assessments. Share any assessments and your response plan. Transparency here builds confidence.
Not much more to say here, just make sure they are in one place so you aren’t scurrying around looking for documents and holding things up during the process.
In Conclusion
Diligence is your chance to reinforce your story with real substance. If everything ties back to the operating model and that model is a living part of your business, you’ll build confidence.
This shouldn’t be a heavy lift if you’ve kept your models current. But if you haven’t, build it now and maintain it. Because the best CFOs own the narrative, not just the numbers.
