How to Build a Due Diligence Checklist for Early-Stage Startups

Due diligence for an early-stage startup is fundamentally a search for hidden liabilities and a check that the founder’s claims are true. Geeta Amelia, Founder and General Partner at Everhouse, argues that founders and new investors should treat it as methodical “dirt digging” rather than a formal audit.

Amelia reviews more than 500 deals a year through Everhouse and invested in 10 startups last year. Her fund focuses on early-stage and Series A data-driven technology ventures, and she built its practice around repeatable diligence modules.

What is due diligence for early-stage startups

The formal definition of due diligence describes an extensive investigative process. Amelia says that wording scares founders and misses the point for early ventures.

Due diligence is just dirt digging. That’s it.

In any stage, the task is to confirm whatever founders claim is true and to find hidden liabilities. She uses a field metaphor: an investor is told there may be silver pieces in a large field, and must lay out the playing field methodically to find them.

Why founders still need to dig even with little data

Angel investors often ask whether diligence matters when a startup has almost no financial history. Amelia answers with a clear yes.

If you do your due diligence you’re five times higher chance of getting a positive return.

Spending at least 20 hours on diligence before committing $100,000 or $500,000 improves outcomes. The data is thin, but the risk of believing false claims is higher, not lower.

Due diligence as dirt digging

The investor is against time because good deals turn competitive. A VC that digs too slowly loses the allocation. So the process must be systematic and fast.

As an investor you’re also against time because in the VC world sometimes really good deals become very competitive and if you’re not fast enough conducting due diligence you get kicked out of deals.

The goal is not a perfect report. The goal is to verify facts and surface what could kill the company.

How venture due diligence differs from private equity

A common mistake is to copy private equity (PE) diligence onto a startup. The two operate on different clocks and priorities.

Time pressure and team size

PE deals enjoy a luxury of three months to twelve months for deep legal and financial review. Venture deals compress the window drastically.

In a venture deal you need to be very creative and think about what are the right questions to ask.

VC teams are small and cannot run 50-email question threads. The venture investor often has as little as one week to form a view, so the work centers on founders and team rather than exhaustive document review.

Alignment over thoroughness

The top factors in PE are thoroughness, accuracy, and finding hidden liabilities. In VC, the first factor is speed.

Number one speed, the founders fact-checking that all of your facts that you claim are facts are indeed correct, and then also the alignment.

Alignment means the investor’s thesis matches the founder’s building thesis. Amelia notes a frequent myth: an investor backs a company but imagines a different product than the founder is actually building. That mismatch alone can ruin the partnership.

How to start: screening with modular libraries

Amelia’s first step is screening—figuring out what type of object you hold before operating on it. She compares it to identifying an apple as red or green before choosing a tool.

Screening is figuring out what it is you’re holding before you operate on a product.

Everhouse builds internal modular libraries: fixed buckets used to classify every incoming startup. This lets them compare new ventures against a large proprietary data set.

Identifying stage and customer type

The screen starts with stage: early stage, Series A, or growth. Growth-stage diligence differs from early-stage because data volume changes.

Next is the customer: B2B, B2C, government, B2B2C, C2C, or peer-to-peer lending. The key question is who pays you.

What client are you serving who are you taking money from.

A B2B enterprise sale has longer cycles than a B2C app, so the documents and questions later will differ.

Mapping innovation type

Startups seeking funding must be innovating. Amelia lists three types:

• Product innovation: building something no one has seen.
• Market innovation: existing product pushed to clients through a new channel.
• Branding innovation: conventional product in conventional channels, repackaged for an underserved niche.

She cites a US company that used branding innovation to reach unicorn status. The type tells the investor where to dig for real differentiation.

Business model and technology core

Business model is how the startup charges: per transaction, freemium, subscription. Amelia says models change often, so they weigh it lightly and encourage founders to stay flexible.

Technology screening asks two things:

1. How core is technology to the value proposition? It may be core, enabled, or optional.
2. What technology type is it—software, mobile app, hardware design?

All investors definitely screen for these if not on paper then in their heads.

Closed-ended questions work during screening. Open-ended questions come later, after the business is understood.

Building the diligence checklist from screened buckets

After screening, the investor breaks diligence into three risk views. Amelia uses a scoring system inside Everhouse to pass startups through the funnel.

The three risk categories

1. Potential upside: is the claimed market and growth real?
2. Hygiene: are legal and basic company requirements in place?
3. Red stack: downside risks that could cause failure.

These categories segregate the field like battleship grids. They let an investor compare same-bucket startups and track scores over time.

Documents to request after screening

Once a startup passes a first or second interview, Everhouse sends a checklist. Typical items:

• Pitch deck
• Business plan
• Sales deck
• Commercial contracts
• Pilot test results

B2B vs B2C changes which documents are required. The request is narrow because the window is short.

Turning buckets into questions

With documents in hand, the investor drafts customized questions. Amelia splits diligence into buckets such as:

• Founder
• Market opportunity
• Business plan
• Company culture (critical at Series A)
• Commercial
• Financial performance
• Deal terms
• Financing needs
• Technology

In a workshop exercise, she gave teams 15 minutes to write three non-traditional questions per bucket for an imaginary startup. The compiled list was shared and flagged.

Real DD requires investor to dig deep and come up with customized Q&A.

In venture, total questions should never exceed four precise rounds. PE may exchange 50 emails; VC cannot.

Running a group exercise to draft questions

Amelia demonstrated the method with a mock company to show how screening informs questions.

Example imaginary startup stack

The mock business was: Series A, B2B, charges premium, product innovation with core technology, software plus mobile app. That single stack determines which buckets matter most.

Because it is Series A, company culture becomes a bucket. Because it is B2B, commercial contracts weigh heavily. Because tech is core, technology questions must go deeper than surface.

Buckets for question drafting

Groups drafted questions across founder, market, plan, culture, commercial, financial, terms, financing, and tech. The point was to avoid generic asks like “what is your revenue?” and instead probe alignment and hidden risk.

A good founder question checks whether the person has paid up committed capital. A good financial question compares stated financials to bank statements. The exercise trains the “smell” that comes from reviewing many deals.

Red flags that kill a deal

Amelia shared common founder behaviors that end conversations immediately.

Founders who lie or change terms

Under pressure, some founders falsify salaries, reputation, or traction. That is a huge red flag.

Founders lie commonly due to pressure, salaries, reputation, pride — huge red flag, we don’t invest.

Another flag: a founder offers different deal terms to different VCs. Terms should be consistent. A founder who has not paid up their own capital shows misalignment.

Mismatched financial records

Everhouse compares financials to bank statements and general ledger to transactions. If they do not tie, it is a deal-breaker.

Passive investors who promise capital but do not transfer it also signal trouble. The hygiene check is not paperwork theater; it reveals whether the team operates honestly.

Term sheets, valuation, and exit planning

The workshop closed with founder questions on legal fees, valuation help, and exit clauses.

Who prepares the term sheet

A founder asked whether the VC or startup drafts the term sheet. Amelia’s rule:

VC should prepare it unless you’re at stage with many VCs backing you.

At competitive stages, founders may receive a template from a lead investor. Early on, the investor writes it.

Helping founders with financial blind spots

First-time founders often return from VC meetings with more confusion than answers. Amelia says good early-stage VCs fill that gap.

We can form a symbiotic relationship and fill out that blind spot.

Everhouse has built financial models for raw teams and connected them to later-stage institutions. The help is conditional on chemistry and willingness to learn. The aim is to prepare the data room and set expectations.

Sustainability and financing needs

A question on sustainability links to the business plan and financing needs buckets. The two must move together.

We need to ensure whatever the founder wants to achieve can be achieved through whatever they can raise.

If the plan projects expansion but financing cannot cover it, the venture fails after two years. The North Star metric is growth after investment, with plan and financing in step.

Exit clauses in the Indonesia context

An attendee mentioned a China-style practice of planning IPO from day one. Amelia noted a term sheet she saw demanded IPO within five years or share buyback.

That doesn’t make sense because of market we’re in.

Indonesia’s tech IPO market is less liquid than China’s. Planning exit from day one is fine, but writing a hard IPO deadline is unrealistic given regional track records. Better to discuss vision—sell, IPO, or buyback—and align verbally.

Key Takeaways

• Treat due diligence as methodical dirt digging: verify founder claims and surface hidden liabilities within a short time window.
• Screen startups into modular buckets (stage, customer, innovation type, tech core) before asking open-ended questions.
• Split risk into upside, hygiene, and red-stack downside; keep VC questions to four precise rounds, not 50 emails.
• Watch for red flags like founder lies, term-shopping, or financials that don’t match bank records.
• Align business plan with financing needs and discuss exit realistically for your market; don’t copy PE or foreign IPO timelines.