Startup India says angel networks and VCs conduct thorough due diligence before finalising equity deals and examine past financial decisions, team credentials and the ability to verify growth/market claims. Prepare evidence before the term sheet: clean corporate/cap-table records, reconciled finance/tax, owned IP, people contracts, customer/vendor contracts and a clear regulatory position.
Six folders expose most issues early
01 Corporate & cap table
Incorporation, MoA/AoA, approvals, registers and current ownership.
- Share issuances/transfers
- ESOP approvals/grants
- Founder/shareholder agreements
02 Finance & tax
Books should reconcile to bank, invoices and filings.
- Financial statements
- Bank statements
- GST/TDS/income-tax
- Loans/related balances
03 IP & technology
Prove the company owns or licenses what it sells.
- Founder IP assignments
- Employee/contractor IP
- Trademark/domain
- Open-source review
04 People
Document key-person dependence and equity promises.
- Employment/consulting agreements
- ESOP evidence
- Confidentiality/IP
05 Customers & vendors
Revenue quality is contractual, not only a dashboard metric.
- Top contracts
- Termination/renewal
- Critical vendors
06 Regulatory & data
Map licences, privacy/security, notices and sector rules.
- Registrations
- Privacy/data docs
- Disputes/notices
The investor is checking whether claims can be verified
Spreadsheet ownership differs from statutory records.
Core product has no clean assignment.
Metrics do not tie to invoices, bank or contracts.
Unfiled forms/notices surface late.
Offer letters promise percentages with no proper scheme/grant.
Revenue depends heavily on one terminable contract.
Founder/family balances have no documents.
The product relies on 'we think we are exempt'.
Backfilling can be necessary, but do it transparently and lawfully. Never fabricate historical approvals, minutes, invoices or signatures.
Prepare before fundraising consumes the founders
If the answer needs a 20-minute story, evidence may not be clean
Diligence is verification
SEBI describes due diligence as comprehensive analysis to ensure material facts are known and understood. Startup India similarly says investors verify financial decisions, team credentials and claims.
| Question | Evidence |
|---|---|
| What am I buying into? | Cap table, share records, IP and contracts. |
| Are the numbers real? | Books, bank, invoices, tax, metric definitions. |
| Can company keep operating? | People, contracts, licences, infrastructure. |
| What can become a liability? | Notices, taxes, related parties, regulatory gaps. |
| Can this team govern new money? | Board records, budgets, approvals and disclosures. |
Make incorporation records diligence-ready from day one
A clean company is easier to fund because the evidence does not need emergency reconstruction. For the base entity setup, see the national Private Limited Company Registration guide.
Questions people ask before acting
When should we create a data room?
Before active fundraising; maintain a lightweight indexed room continuously.
Does a term sheet guarantee funding?
No. Startup India describes diligence as a step before funding is finalised.
Should we disclose known issues?
Material issues should be addressed transparently with appropriate advice.
Do pre-seed startups need huge data rooms?
They need accurate, proportionate evidence — not fake formality.
What matters most?
Consistency: cap table, bank, contracts, tax and IP should tell the same story.
Official sources used
Community discussions were used to find real founder questions. Legal and tax statements are anchored to official sources.
TargoLegal Research and Editorial Desk · 14 August 2026. Recheck live forms, notifications and rules before acting.
