The short answer
Seed due diligence checks that your pitch is true and that nothing hidden will hurt the investment: team, market, product, traction, customers, financials, legal and cap table, and sector regulation. Prepare consistent metric definitions, customer references, a clean cap table and a short diligence FAQ that names your risks before investors find them.
- Diligence ranges from a few calls at pre-seed to weeks of review with a seed lead.
- Consistent metric definitions across deck, model and dashboard prevent most traction doubts.
- Investors check legal basics: vesting, 83(b) filings, IP assignments and a reconciled cap table.
- Healthcare, fintech, hardware and climate founders face extra sector questions.
- A two-to-four page diligence FAQ that names your risks saves time and builds trust.
- Give diligence one owner and answer within one business day.
What due diligence looks like at pre-seed and seed
Due diligence is the investor checking that what you pitched is true and that nothing hidden will hurt the investment. At pre-seed it can be a few calls and a look at your cap table. At seed, a lead investor may spend several weeks on customer calls, financial review, legal documents and reference checks.
How deep it goes depends on the investor. In the Zalarma investor database, 19,738 US startup investor records list seed as a stage, from angels writing small checks who may only call a customer or two, to funds that lead and run a full review.
The fastest rounds are the ones where founders answered most questions before they were asked. This guide lists the questions you're likely to get, grouped by area, with what a strong answer looks like and what to have ready.
The diligence map
| Area | What investors are checking | Have ready |
|---|---|---|
| Team | Can this team build and sell this? | Bios, roles, equity split, references |
| Market | Is there a big enough, reachable buyer? | Bottom-up market sizing, customer segments |
| Product | Does it work, and is it defensible? | Demo, roadmap, architecture notes, IP list |
| Traction | Are the numbers real and improving? | Metrics with definitions, cohort or retention data |
| Customers | Do customers value it and stay? | Reference contacts who agreed to talk, contracts, LOIs |
| Financials | Is the plan realistic? | Monthly P&L, cash, burn, model with assumptions |
| Legal and cap table | Is the company clean? | Formation docs, cap table, SAFEs, IP assignments |
| Regulatory | Are there sector rules that could stop you? | Pathway memo, permits, compliance policies |
Team questions
- How did the founders meet, and how long have you worked together?
- Who does what, and who makes the final call when you disagree?
- How is equity split, and does everyone have vesting?
- Is everyone full time? If not, when will they be?
- Who are the next three hires, and can you recruit them where you are?
- Can we speak to people who've worked with you?
Strong answer: clear roles, vesting for every founder, an honest account of gaps and how you'll fill them. Investors often call references you didn't give them, so make sure former colleagues won't be surprised.
Market and competition questions
- Who exactly buys this, and who signs the check?
- How did you size the market? Walk us through the bottom-up math.
- Who else is solving this, and why will you win?
- What happens if a large incumbent copies you?
- Why is now the right time?
Strong answer: a bottom-up estimate (number of buyers × realistic price) rather than a top-down industry figure, and a competitor list that includes spreadsheets, consultants and doing nothing. See TAM, SAM and SOM.
Product and technology questions
- What's built, what's in progress and what's still a plan?
- What's hard to copy: data, technology, relationships, regulatory approvals?
- Who owns the code and IP? Did anyone build it before the company existed?
- How do you handle security and customer data?
- What are the biggest technical risks in the next 18 months?
Traction and customer questions
- How do you define each metric (revenue, active user, customer)?
- What does retention look like by cohort?
- How did your last ten customers find you, and how long did each sale take?
- What's your pipeline, and how much of it is likely to close this quarter?
- Can we talk to two or three customers, including one who almost churned?
Strong answer: consistent definitions across deck, model and dashboard; customers who say the same thing you said. Prepare references with a short note on what the investor may ask, but never script them.
Financial questions
- What's your monthly burn and runway today?
- What does the money from this round buy, month by month?
- What are your unit economics (price, gross margin, acquisition cost, payback)?
- What has to be true for the model to work, and what happens if growth is half the plan?
- Any debt, grants, revenue-based financing or unusual obligations?
Use the runway calculator and use-of-funds template to make these answers concrete. See also burn rate.
Legal and cap table questions
- Is the company a Delaware C-corporation or something else? Any conversions?
- Does the cap table match every signed SAFE, note and stock agreement?
- Did every founder, employee and contractor sign an invention assignment?
- Were 83(b) elections filed for founder stock?
- Any litigation, threatened claims or disputes with former co-founders?
- Any side letters or promises of equity not on the cap table?
The seed data room checklist covers the documents, and the term sheet guide covers what investors will ask for in return.
Sector-specific questions
| Sector | Questions to expect |
|---|---|
| Healthcare and digital health | Is the product regulated as a medical device? How do you protect patient data? Who pays: patient, provider, employer or insurer? What clinical evidence do you have? |
| Fintech | Which licenses do you need, or which partner holds them? What does your compliance program look like? |
| Manufacturing and hardware | What's the unit cost at volume? Who manufactures, and what are the minimum orders? What certifications are required? |
| Climate and energy | What permits or interconnection approvals are needed? Which revenue depends on incentives or grants? |
| Consumer | What do acquisition costs and repeat purchase rates look like by channel? |
Reference checks: on you and by you
At seed, investors often run two kinds of reference checks. "On-list" references are the people you give them: former managers, co-workers and customers. "Off-list" references are people they find on their own, often through shared connections on professional networks. Assume both will happen.
- Give each of your references a heads-up and a two-line summary of the round, so they're not caught off guard.
- Pick references who can speak to specific things: how you sell, how you hire, how you handle a crisis.
- If there's a hard story in your past, such as a failed company or a co-founder split, tell the investor yourself before they hear it elsewhere.
Answers that worry investors
| What worries them | Better approach |
|---|---|
| Metrics that change between the deck and the data room | One definition per metric, used everywhere |
| "We have no competitors" | Name the alternatives, including doing nothing |
| Slow or vague answers to document requests | A ready data room and a reply within one business day |
| Customers who can't explain why they bought | Prepare references who use the product every week |
| Surprises in the cap table | A reconciled cap table, shared before they ask |
Write a diligence FAQ before anyone asks
A two-to-four page document answering the predictable questions saves hours and shows you know your weak spots. Put it in the data room next to the Q&A log. An outline you can copy:
[Company] diligence FAQ (updated [date]) 1. Company snapshot: one paragraph, key metrics with definitions 2. Team: roles, equity and vesting, open hires 3. Customers: segments, top customers, references available 4. Traction: metrics table, cohort retention, pipeline 5. Market: bottom-up sizing and assumptions 6. Competition: alternatives and why customers choose us 7. Financials: burn, runway, use of funds, unit economics 8. Legal: entity, cap table summary, IP assignments, 83(b) status 9. Regulatory: pathway, permits, compliance (if relevant) 10. Known risks and how we're addressing each
Section 10 matters most. Investors will find your risks anyway; naming them first, with a plan, earns trust.
How to run diligence without stalling the company
- One owner. One founder handles diligence; the other keeps the business moving.
- Answer within one business day, even if the answer is "we'll have that by Thursday".
- Log every question and answer so the next investor gets the same, consistent answer.
- Diligence the investor too. Ask to speak with founders they've backed, including one where things went badly.
- Keep the round moving. Diligence with your lead is the moment to line up the rest of the round. See how to find and close a lead investor.
Source for Zalarma figures: Zalarma investor database, as of 2026-11-01. Counts are records in our database, not the whole market; a record can list more than one stage or sector.
Frequently asked questions
What do investors look at in seed due diligence?
The team, market sizing, product and IP, traction and metric definitions, customer references, financials and runway, legal documents and cap table, and any sector regulation.
How long does due diligence take at seed?
It varies with the investor and how prepared you are. A prepared founder with a data room and diligence FAQ can move much faster than one who assembles documents on request.
Will investors call my customers?
Often, yes. Offer two or three references who've agreed to talk, give them a heads-up on what may be asked, and expect investors to sometimes find other customers on their own.
What is a diligence FAQ?
A short document in your data room that answers predictable questions about team, customers, traction, market, financials, legal and risks, so investors get consistent answers quickly.
Should I do due diligence on investors too?
Yes. Ask to speak with founders they've backed, including one whose company struggled, and ask how they behave when things go wrong.