Preparing a due diligence folder for a funding round
How a start-up gathers its financial and legal documents for investors' due diligence and shares them with expiry, codes and download control.
By Achekam · · 4 min read · For Software (SaaS) businesses in South Africa, Nigeria, Kenya
The term sheet is agreed in principle, and the lead investor's associate sends a due diligence request list that runs to several pages. Share register, founder agreements, customer contracts, IP assignments, management accounts, tax filings, employment contracts, the cap table, board minutes. They would like everything by the end of next week.
Most start-ups answer that list with a scramble through mailboxes and personal drives, then attach files to e-mails that get forwarded to people nobody approved. The round closes, but nobody can say afterwards which version of which contract each investor saw. A little structure avoids that. This article shows how to build the folder in Achekam's Document Centre and share it in a way you stay in control of.
What investors ask for in due diligence
Request lists differ, but they fall into a few groups:
- Corporate. Incorporation documents, the share register, shareholder agreements, board and shareholder resolutions, any previous funding documents. Investors check these against the records company law requires you to keep, so start from your statutory registers rather than from memory.
- Financial. Management accounts, the trial balance, annual financial statements if you have them, bank statements, a debtors list, the budget and the runway model.
- Commercial. Customer contracts and order forms, reseller agreements, key supplier contracts, pricing.
- People. Employment contracts, contractor agreements, the share option plan, IP assignment letters from every founder and engineer.
- Tax and compliance. Tax registrations and filings, VAT returns, payroll submissions, data protection policies.
- Technology. Ownership of the code, open-source use, hosting arrangements, security policies.
You will not have everything. Investors would rather see a clear "not yet in place" than discover a gap later.
A folder structure for the round
Document Centre is a folder-based store. A business uploads single files or whole folders, previews, downloads, renames and moves them, and can archive what is no longer current. Uploads go in batches of up to 25 files, at up to 100 MB per file by default, which suits a contract archive but means a large dump needs several batches.
Mirror the investor's request list in your folders, numbered in the same order: 1 Corporate, 2 Financial, 3 Commercial, and so on. When the associate asks for a numbered item, someone on your side can find it without searching.
For the financial folder, export from the books rather than building figures by hand. Management accounts give an income statement for a chosen period beside the period before, and a balance sheet at period end, both exportable as PDF or CSV. The trial balance shows every account for a period or at a date and says whether debits equal credits.
Versions, tags and search
Due diligence produces revisions: a shareholder agreement re-signed with a correction, a cap table updated after a conversion. When you upload a new version of a document, the earlier versions are kept, so you can show what changed and when.
Tag documents by request-list item and by status, such as "final", "draft" or "awaiting signature". Search then finds every document carrying a tag, which helps when the investor's lawyer asks for "everything still outstanding".
Sharing with expiry, one-time codes and downloads switched off
A document can be shared by e-mailing a personal link to one person. For each share you set an expiry, can require a one-time code, and choose whether downloading is allowed. A share can be revoked at any time.
Use those settings deliberately:
| Document | Expiry | One-time code | Download |
|---|---|---|---|
| Pitch-stage summary financials | Short | Optional | Allowed |
| Customer contracts with pricing | End of the diligence period | Yes | Off |
| Cap table and share register | End of the diligence period | Yes | Off |
| Signed final documents for counsel | Short | Yes | Allowed |
Shares go document by document to named people, so keep a simple log of who received what. If an investor drops out, revoke their shares the same day. Sharing claim documents by secure link shows the same sharing controls in a different industry.
Fingerprints that show a file has not changed
Every stored file gets a SHA-256 fingerprint: a short code computed from its exact contents. If even one character in a contract changes, the fingerprint changes. When the investor's counsel later asks whether the customer agreement they reviewed is the one in your files, the fingerprint answers the question.
Uploads also pass a malware check, and executable files are refused by default, which matters when documents arrive from outside advisers. Document fingerprints explains the idea in more depth.
Signing the term sheet and other documents electronically
Any document can be sent for electronic signature. You place signature and initials fields, choose whether signers go in order or all at once, and set an expiry and reminders. The signed PDF and a completion certificate are filed back into Documents, next to the drafts. An envelope with a signer from outside the business must be linked to a client or a CRM lead before it is sent, so add the investor's signatory to your records first.
Two points to check. Whether an electronic signature is enough for a particular document is a legal question; UNCITRAL's Model Law on Electronic Signatures sets out the reliability criteria behind many national e-signature laws, and your lawyer will tell you what your country requires for share transfers and resolutions. And at the time of writing, the completion certificate describes the signatures under South Africa's Electronic Communications and Transactions Act whatever the workspace's country, which Nigerian and Kenyan companies should mention to their lawyers.
Before the request list arrives
Build the folder structure now, while nobody is waiting. Fill the corporate and financial folders first, since every investor asks for them, and keep the monthly packs going in as you produce them, as described in sending monthly figures to investors. When diligence starts, you will be sharing, not searching.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
