What VCs Actually Check in Financial Due Diligence

It's broader than just "are the numbers accurate"

Financial due diligence for a funding round isn't only about verifying historical figures — it's about assessing whether the business's financial story holds together and whether the numbers support the growth narrative being pitched.

What typically gets scrutinised closely

• Revenue quality — is revenue recurring and diversified, or concentrated in a few large, potentially unstable customers?
• Unit economics — do the numbers behind customer acquisition cost, lifetime value, and margins actually support the growth plan being pitched?
• Cap table cleanliness — are all prior fundraising rounds, ESOP grants, and convertible instruments properly and consistently documented?
• Statutory compliance history — GST, TDS, ROC filings, and PF/ESI compliance, since gaps here are a recurring source of diligence delays
• Related-party transactions — anything involving founders or their other entities gets extra scrutiny
• Contingent liabilities — pending litigation, tax notices, or guarantees that aren't obvious from the balance sheet alone

What commonly slows a diligence process down

• Financial records that aren't reconciled or consistently maintained month to month
• A cap table maintained informally rather than through a proper instrument-by-instrument record
• Related-party transactions that weren't documented or approved at the time
• Founders unable to quickly produce historical statutory filings when requested

How to prepare well before you're in a live process

The businesses that raise fastest are usually the ones where clean books, a well-maintained cap table, and organised statutory records were already a habit before the fundraise started — not something assembled hastily once term sheet conversations begin. A data room prepared in advance, even loosely, saves real time once diligence formally starts.

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