due-diligence-dataroom

# Due Diligence Data Room Skill Build investor-ready and acquirer-ready data rooms for fundraising (SAFE, priced rounds, Series A/B) and M&A (sell-side or buy-side). This skill guides Sam Ledger through organizing DD documents, identifying gaps, scoring readiness, and producing a clean data room index. --- ## When to Use This Skill **Trigger phrases:** - "Set up a data room" - "What do investors need for due diligence?" - "Prepare for Series A DD" - "What documents do we need for the M&A process?" - "Audit our data room" - "Create a DD checklist" - "We're getting acquired — what do they need?" - "Rate our due diligence readiness" **NOT for:** - Tax filing or accounting — use QBO/compliance workflows - Smart contract security audits — use `solidity-audit-precheck` - Legal advice on specific clauses — refer to counsel - Ongoing contract management — use `contract-review-agent` - Cap table creation from scratch — use `cap-table-manager` - Financial model building — use `startup-financial-model` --- ## Data Room Structure Standard folder taxonomy used by institutional investors and M&A advisors: ``` /DataRoom ├── 01_Corporate │ ├── Certificate of Incorporation (current + all amendments) │ ├── Bylaws / Operating Agreement │ ├── Board Resolutions (key actions last 3 years) │ ├── Organizational Chart │ └── Subsidiaries & Foreign Qualifications │ ├── 02_Financial │ ├── Financial Statements (3 years audited or reviewed) │ ├── Management Accounts (latest 12 months, monthly) │ ├── Financial Model (base/bear/bull scenarios) │ ├── Tax Returns (3 years federal + state) │ ├── Accounts Receivable Aging │ ├── Accounts Payable Aging │ └── Bank Statements (6–12 months) │ ├── 03_Cap_Table │ ├── Cap Table (fully diluted, current) │ ├── Stock Option Plan (ISO/NSO plan document) │ ├── Option Grants (individual grant summaries) │ ├── SAFE Agreements (all outstanding) │ ├── Convertible Notes (all outstanding) │ ├── Investor Rights Agreement │ ├── Right of First Refusal Agreement │ └── 409A Valuation (most recent) │ ├── 04_Contracts_Commercial │ ├── Customer Contracts (top 10 by revenue) │ ├── Vendor/Supplier Agreements (key dependencies) │ ├── Partnership Agreements │ ├── Distribution Agreements │ └── LOIs / MOUs (current) │ ├── 05_Intellectual_Property │ ├── Patent Applications & Grants │ ├── Trademark Registrations │ ├── Copyright Registrations │ ├── Trade Secret Policy │ ├── IP Assignment Agreements (founders + employees) │ └── Open Source Policy + License Inventory │ ├── 06_HR_People │ ├── Employee List (names, titles, start dates, salaries) │ ├── Offer Letters (key hires / executives) │ ├── Employment Agreements (exec NDAs, non-competes) │ ├── Contractor/1099 List + Agreements │ ├── Benefits Summary Plan Document │ ├── PEO/Payroll Provider Agreement │ └── Org Chart (people version) │ ├── 07_Legal_Compliance │ ├── Litigation History (pending, settled, threatened) │ ├── Regulatory Licenses / Permits │ ├── Privacy Policy + Terms of Service │ ├── GDPR / CCPA Compliance Documentation │ ├── Data Processing Agreements (key vendors) │ └── Insurance Policies (D&O, E&O, Cyber, General Liability) │ ├── 08_Technical │ ├── Architecture Diagram (system overview) │ ├── Tech Stack Summary │ ├── Security Audit Reports (penetration tests, SOC 2) │ ├── Uptime / SLA History │ ├── Disaster Recovery Plan │ └── Data Handling / Privacy Architecture │ └── 09_Business_Overview ├── Pitch Deck (current investor version) ├── Executive Summary / One-Pager ├── Product Roadmap ├── Customer References (top clients) └── Market Research / Competitive Analysis ``` --- ## DD Readiness Scoring Score each category 0–100 based on document completeness: | Category | Weight | Scoring Logic | |---|---|---| | Corporate | 10% | All formation docs present, current, signed | | Financial | 25% | 3yr statements + monthly actuals + model + bank stmts | | Cap Table | 20% | Fully diluted table + all agreements + 409A current | | Commercial | 15% | Top 10 customer contracts + key vendor agreements | | IP | 15% | Assignments from all founders/employees + IP inventory | | HR/People | 10% | Employee list + exec agreements + benefits docs | | Legal | 10% | Litigation disclosure + licenses + insurance | | Technical | 5% | Architecture + security + SLA history | **Overall Readiness Score:** ``` Score = Σ (Category Score × Category Weight) Interpretation: 90–100: Investor-ready. Proceed. 75–89: 1–2 week gap closure. Flag gaps to founder. 50–74: 2–4 weeks work. Significant gaps present. <50: Not ready. Build foundational documents first. ``` --- ## Gap Analysis Output When auditing an existing data room, produce a gap report in this format: ``` DUE DILIGENCE READINESS REPORT Company: [Name] Date: [Date] Assessed by: Sam Ledger / PrecisionLedger OVERALL SCORE: 72/100 — Needs 2–3 Weeks of Work CATEGORY BREAKDOWN: ┌─────────────────────┬───────┬────────────────────────────────────────────────┐ │ Category │ Score │ Missing / At Risk │ ├─────────────────────┼───────┼────────────────────────────────────────────────┤ │ Corporate │ 90% │ Missing: Foreign qualification (Delaware co) │ │ Financial │ 65% │ Missing: Audited statements, 409A outdated │ │ Cap Table │ 80% │ Missing: 2 SAFE agreements not countersigned │ │ Commercial │ 70% │ Missing: Contracts for 3 of top 10 customers │ │ IP │ 55% │ Missing: IP assignment from 1 co-founder │ │ HR/People │ 85% │ Minor: Outdated offer letters for 2 eng hires │ │ Legal │ 90% │ OK │ │ Technical │ 60% │ Missing: Pen test report, no SLA documentation │ └─────────────────────┴───────┴────────────────────────────────────────────────┘ CRITICAL GAPS (will stall deal): 1. IP Assignment from co-founder [Name] — get signed before outreach 2. 409A valuation — expired 18+ months ago, investor will flag 3. Audited financials — Series A investors typically require 1 year audit minimum HIGH PRIORITY (2-week fix): 4. SAFE countersignatures — pull originals, chase signatories 5. Missing customer contracts — get NDAs or MSAs on file MEDIUM PRIORITY (can fix in parallel): 6. Foreign qualification certificate from Delaware 7. Pen test report — schedule if not done 8. Offer letter refresh for recent eng hires RECOMMENDED NEXT STEPS: Week 1: Resolve Critical Gaps (IP assignment, 409A, audited financials) Week 2: High Priority items Week 3: Full review + data room QA pass ``` --- ## Document Checklist by Round Type ### SAFE / Pre-Seed Round (Minimal DD) ``` □ Certificate of Incorporation □ Cap table (current, all SAFEs included) □ Financial model or pitch deck financials □ SAFE template to be signed □ Founders' IP assignments □ Bank statements (3 months) ``` ### Series A (Full Institutional DD) All folders above, plus: ``` □ Audited financials (1 year minimum, 2 preferred) □ Monthly management accounts (last 12 months) □ 409A valuation (< 12 months old) □ Board minutes for all major decisions □ Fully diluted cap table (with option pool) □ All outstanding convertible instruments (SAFEs, notes) □ Customer contracts (top 10 by revenue) □ IP assignments (all founders, key employees, contractors) □ Employment agreements (all executives) ``` ### M&A Sell-Side All Series A above, plus: ``` □ 3 years tax returns (federal + state) □ Historical financial statements (3–5 years) □ All material contracts (customer, vendor, partnership) □ Litigation history (last 5 years, including settled) □ Environmental compliance (if applicable) □ Real property leases □ Insurance policies with coverage limits □ Employee benefit plan documents (401k, health) □ Change of control provisions in key contracts □ Government contracts or regulated agreements ``` --- ## Step-by-Step Workflow ### Step 1: Scope the DD Type Determine: - **Type:** Fundraising (which stage?) or M&A (sell-side or buy-side)? - **Timeline:** When is the investor/acquirer expecting access? - **Audience:** Who is reviewing? (VC, PE, strategic acquirer, family office?) ### Step 2: Intake Audit Ask the founder/CFO to share: - Existing data room link or folder structure - List of what's been prepared vs. not started - Any known legal issues (pending litigation, IP disputes) - Outstanding cap table instruments (unconverted SAFEs, notes) ### Step 3: Build Gap Report Map what exists against the master checklist above. Score each category. Flag critical gaps (deal-stoppers) vs. nice-to-haves. ### Step 4: Prioritize Sequence by: 1. Deal-stoppers first (IP assignments, 409A, audited financials) 2. Investor-specific asks (some VCs have custom checklists — get theirs) 3. Everything else in parallel ### Step 5: Draft Document Summaries For key documents, produce a 3-line summary: - What it is - What it says (key terms) - Any red flags or notes for investor ### Step 6: Build the Data Room Index Produce a master index document: ``` DATA ROOM INDEX — [Company Name] Last Updated: [Date] Section 1: Corporate 1.1 Certificate of Incorporation (Delaware, 2022) ✓ 1.2 Certificate of Amendment — Series Seed (2024) ✓ 1.3 Bylaws (as amended 2024) ✓ 1.4 Board Resolutions — [Summary] ✓ 1.5 Foreign Qualification — California [MISSING] Section 2: Financial 2.1 2023 Audited Financial Statements ✓ 2.2 2024 Management Accounts (Jan–Dec) ✓ 2.3 2025 YTD Management Accounts ✓ 2.4 Financial Model (Base/Bear/Bull, 36 months) ✓ 2.5 2022–2024 Federal Tax Returns ✓ 2.6 AR Aging Report (as of [Date]) ✓ ... ``` ### Step 7: Final QA Pass Before opening data room access: - [ ] All files named consistently (no "final_FINAL_v3.pdf") - [ ] No personal employee info visible to all viewers (use sub-folders with tiered permissions) - [ ] Sensitive items (bank statements, SSNs) restricted to appropriate viewers - [ ] Index document is current and matches folder contents - [ ] Watermarks on sensitive docs if required --- ## Example Interaction **User:** "Our Series A investor wants data room access in 2 weeks. We've never set one up. Where do we start?" **Sam's response:** ``` Two weeks is tight but doable if we move fast. Here's the triage plan: FIRST 48 HOURS — Stop everything else, get these: 1. IP Assignments — every founder and early contractor must sign. This is the #1 deal-killer. I'll need: names of all founders, date company was incorporated, names of any early freelancers who touched the product. 2. Cap Table — send me whatever you have (spreadsheet, Carta export). I'll audit it and identify any missing countersignatures. 3. Financial Statements — do you have a CPA? If yes, request management-reviewed or compiled statements for 2023 + 2024. Full audit takes weeks — we'll flag the gap and provide reviewed. THIS WEEK — Collect in parallel: □ All customer contracts (even just the signed MSAs/SOWs) □ Certificate of Incorporation + any amendments □ Board minutes (any major funding, equity, or officer decisions) □ Existing insurance policies (D&O is the critical one) NEXT WEEK — Build + QA: □ I'll build the data room index and folder structure □ Financial model review and clean-up □ Full gap report for investor What platform are you using for the data room? (Notion, Google Drive, Carta Data Room, Caplinked, DocSend?) I'll tailor the structure. ``` --- ## Platform-Specific Notes | Platform | Best For | Notes | |---|---|---| | Google Drive | Early-stage, SAFE rounds | Easy setup, permission by folder, familiar | | Carta Data Room | Series A+ with Carta cap table | Native integration, investor-friendly | | Notion | Small rounds, internal prep | Good for checklists, not ideal for investor DD | | DocSend | Tracking investor engagement | Analytics on who views what, for hours | | Caplinked / Intralinks | M&A, larger rounds | Watermarking, NDA-gating, enterprise features | | Box / SharePoint | Acquirer-preferred in M&A | Enterprise IT often requires these | --- ## Red Flags to Surface to Counsel When auditing documents, flag these immediately — do not attempt to resolve without legal: ``` ⚠️ Missing IP assignment from any co-founder or early employee ⚠️ Pending or threatened litigation not previously disclosed ⚠️ Customer contract with change-of-control clause (may block M&A) ⚠️ Government contract with anti-assignment provision ⚠️ Open-source license with copyleft (GPL) in commercial product ⚠️ Options granted below 409A fair market value (IRS issue) ⚠️ SAFE or note with full-ratchet anti-dilution (rare, toxic) ⚠️ Non-compete clauses in jurisdictions where they're unenforceable ⚠️ Data breach history not yet disclosed ⚠️ Expired regulatory license or lapsed compliance certification ``` --- ## Integration Points - **`startup-financial-model`** — generate or audit the financial model included in Section 02 - **`cap-table-manager`** — build or reconcile the fully-diluted cap table for Section 03 - **`contract-review-agent`** — summarize and flag key customer/vendor contracts for Section 04 - **`kpi-alert-system`** — once funded, monitor key metrics investors will track post-close - **`report-generator`** — format the gap report into an investor-ready PDF memo --- ## Reference: Series A Investor DD Checklist (Condensed) ``` FINANCIAL □ 3 years financial statements (audited preferred, reviewed acceptable) □ YTD management accounts (monthly, current) □ 36-month financial model with assumptions □ AR aging + top 10 customer concentration □ Tax returns (2 years minimum) LEGAL / CORPORATE □ Certificate of Incorporation + all amendments □ Bylaws (as amended) □ Board minutes (major resolutions) □ All equity/instrument agreements (SAFEs, notes, stock plan) □ Fully diluted cap table □ 409A valuation (< 12 months) COMMERCIAL □ Top 10 customer contracts □ Key vendor/dependency agreements □ Any exclusivity, MFN, or anti-assignment clauses flagged PEOPLE □ Employee census (name, title, start date, salary, equity) □ Executive offer letters and employment agreements □ Option grant ledger □ Independent contractor agreements (key ones) IP □ IP assignment agreements (all founders, employees, contractors) □ Patent / trademark filings □ Open-source license inventory □ Trade secret policy TECHNICAL / SECURITY □ System architecture overview □ Security audit or pen test (< 18 months) □ SOC 2 / ISO 27001 (if applicable) □ Uptime / incident history ```