What Your Investor's Lawyer Is Actually Looking For
The diligence process, ranked by what actually causes problems.
Jason Acevedo | April 10, 2026
A guide to understanding what investor counsel focuses on during due diligence and how to prepare your company.
When a VC's counsel sends over a diligence request list, most founders see a wall of document requests and assume it is a formality. It is not.
Diligence is where the investor's legal team is building a risk profile of your company. They are looking for anything that could blow up the deal, create liability, or affect the valuation they just agreed to.
Here is what they actually care about, ranked by how often I see each item cause problems.
1. IP Ownership
This is always first. Does the company actually own its intellectual property? Are there signed IP assignment agreements from every founder, employee, and contractor who touched the product?
If someone built code before the company was incorporated and never assigned it, that is a red flag that can pause an entire round. Same goes for contractors who wrote meaningful code or created content under handshake deals. The investor needs to see a clean chain of ownership from the creator to the company.
The fix is signed IP assignments for everyone. Founders sign at formation. Employees sign as part of their offer letter package. Contractors sign before they start work. No exceptions.
2. Cap Table Accuracy
They are going to rebuild your cap table from source documents. Every stock issuance, every option grant, every SAFE, every convertible note. If their numbers do not match yours, that is a conversation. If you cannot produce the documents behind your cap table, that is a bigger conversation.
The most painful version of this: a founder who promised equity to an early employee but never formalized the grant, or issued options without board approval. Both are fixable, but both take time.
3. Corporate Housekeeping
Board minutes, stockholder consents, annual filings, qualified to do business in the right states. None of this is exciting. All of it matters.
Missing board approvals for prior equity issuances is more common than you would think, and it is a pain to fix retroactively. You end up drafting ratification resolutions and collecting signatures from people who may not be paying attention anymore.
4. Employment and Contractor Agreements
Does every employee have an offer letter, an IP assignment, and a non-disclosure agreement? Are contractors properly classified? Is anyone misclassified as 1099 who should be W-2? These questions come up in every single deal.
Misclassification is a particular landmine because it is not just a legal issue. It is a potential tax liability that can follow the company for years.
5. Material Contracts
Customer agreements, vendor contracts, partnership deals. They want to know what obligations the company has and whether any of them have change-of-control provisions that could be triggered by the investment.
A change-of-control clause in a key customer contract can become a negotiation point in the middle of your round. Better to know about it in advance.
6. Litigation and Regulatory
Any pending or threatened claims. Any regulatory requirements specific to your industry. For most seed-stage companies this is clean, but when it is not, it can be a dealbreaker.
The Pattern
Founders who keep clean records close in six weeks. Founders who do not spend the first three weeks of their raise scrambling to produce documents they should have had all along.
If you are planning to raise in the next six months, pull up a standard diligence checklist and see how many items you can check off today. Whatever is missing is your to-do list.