A founder sends a deck with $1.2 million in annual recurring revenue. The investor's analyst opens the QuickBooks export and finds $940,000 of revenue for the year. Both numbers are defensible; nobody has written down how one becomes the other. Three weeks pass. That is the typical diligence delay, and it is a preparation problem, not a business problem.
Financial statements
- Monthly profit and loss, balance sheet and cash flow for the last 24 to 36 months, on an accrual basis, from a reconciled file. Cash-basis books are the first thing an investor asks to be converted.
- Annual statements for each full year, with the file locked at year-end so the numbers do not move under the reader.
- A bridge from the management numbers to the tax return for each year, explaining the differences.
- Bank statements for the last twelve months, and a reconciliation of closing cash to the balance sheet.
Revenue
- Revenue by customer by month, in a single sheet that totals to the profit and loss. This is the sheet analysts spend the most time in.
- For subscription businesses: MRR movements (new, expansion, contraction, churn) by month, with the definitions written down, and a reconciliation from MRR to recognised revenue to invoiced revenue to cash collected.
- Deferred revenue schedule showing how prepayments unwind.
- Customer concentration: top ten customers as a percentage of revenue.
- Copies of the largest customer contracts and the standard terms.
Costs and headcount
- Gross margin analysis with a written definition of what is in cost of sales.
- Headcount list by role, start date, location, compensation and contractor versus employee status.
- Payroll registers and the last four quarters of payroll tax filings.
- Vendor list with annual spend over a threshold and copies of material contracts (hosting, leases, key suppliers).
Tax and compliance
- Filed federal and state returns for every open year, with proof of filing and payment.
- Sales tax registrations, nexus analysis and filed returns; a note on any state where exposure exists and has not been addressed. Unaddressed sales tax is the most common diligence finding for online businesses.
- Form 5472 filings for foreign-owned entities; transfer pricing documentation where a foreign subsidiary or parent provides services.
- 1099 filings, state annual reports, franchise tax confirmations, good standing certificates.
- Any IRS or state correspondence, and how each item was resolved.
Capitalisation
- Cap table, fully diluted, agreeing to the formation documents, stock ledger, SAFEs, notes and option grants.
- Board consents and 409A valuations where options have been granted.
- Debt schedule: lenders, balances, rates, covenants, security.
The model
A three-statement model that starts from the actuals in the data room and projects 24 to 36 months, with assumptions on a single sheet. The historical columns must equal the statements above to the dollar. Investors will rebuild the model; what they check is whether the founder's version was built from real numbers.
Format and hygiene
A folder structure that matches this list; PDFs for filed documents, spreadsheets for schedules, an index with dates; one named person answering questions within a day. Every number that appears in two places should agree, and where it cannot, a one-line explanation sits next to it.
Timeline
From reconciled books, two to three weeks to assemble. From books that have not been closed monthly, add the catch-up first. Starting three months before a raise is comfortable; starting after the term sheet is where founders lose leverage, because every week of diligence delay is a week the investor's enthusiasm cools.
The check: does the revenue figure in your deck reconcile to the accounting file in one written step? If not, that reconciliation is the first document to write.