Part 1 in the “Navigating Diligence: The Bling Capital Playbook” Series
Why We’re Writing This Diligence Guide for Startup Fundraising
Raising money is a pivotal moment for startups. It means finding investors who believe in your vision—and whom you trust enough to help you build the business.
But once talks with VCs get serious, most founders ask the same question: “What exactly do I need to prepare for diligence?”
We built this series as a practical cheat sheet to guide you through diligence, whether it’s with Bling Capital or any other investor. Each post covers a common diligence exercise, explaining clearly:
- What investors are really asking
- Why the question matters and how to address it
- How your answer sharpens your overall plan (together, all the diligence exercises)
Incidentally, these materials aren’t just useful for diligence during fundraising—they’re the same ones you’ll use for company-building too.
Why Investor Diligence Matters for Your Startup
Many founders mistakenly assume diligence begins after receiving a term sheet. Actually, diligence kicks off the moment a VC expresses serious interest.
Diligence isn’t a test to pass or boxes to check. Instead, diligence helps investors:
- Understand what collaborating with you will be like
- Align on a realistic and believable post-investment plan
And just as importantly, it helps you assess whether this investor is the right partner for you.
Good diligence creates clarity around:
- What exactly are we building?
- What’s our next major milestone, and what risks might stop us?
- Do we see the same future for the company?
What Diligence Looks Like at Different Stages
Pre-seed Stage Diligence
Diligence is light. There’s not much data to comb through, so investors mainly focus on the story, the founders, the idea, market size, and your goals for the round. Early traction helps but isn’t the main point; everyone knows the product will probably evolve significantly. At this stage, investors are mainly trying to understand “the initial shape of the company”—and what it wants to become—and whether founders see the same “shape” and are similarly aligned.
Seed Stage Diligence
Still largely about the founders and story, but now investors also check early data. Seed diligence is about proving the “base case”—i.e. the problem is real, the solution resonates, and customers are starting to stick around. Expect questions on customer engagement and usage patterns, retention, initial go-to-market, how you’ve segmented the market, and core team hiring plan. Investors are asking themselves: Given this early traction and capital, can we “build a machine” that prints new customers or revenue.
Series A Diligence
Now investors want proof points. Series A diligence is about proving the “inductive case”—i.e., not only are customers using and paying for the product, but they’re sticking around and expanding. Investors will want to see what’s working now can scale: they’ll review data to understand product-market fit, scalable growth potential, unit economics, your hiring strategy, and your repeatable growth playbook. Investors are looking to understand that what you’re doing now works, it’s generalizable, and can continue to grow over time. Think of this as: we have proven “the machine is working” and now we’re using capital to turn this into “a machine that prints out more machines”.
The Primary Goal of Investor Diligence for Startups
The primary goal is straightforward:
Both founders and investors should align on a believable plan to reach the company’s next milestone towards becoming a venture-scale business.
This alignment usually involves clear answers across several dimensions:
Product / Market
- What’s being built, and for whom, and what problem is being solved?
- Why is it significantly (ideally 10x) better than existing alternatives?
Scale / Opportunity
- How big can this company realistically get with reasonable assumptions on market penetration?
- Do we agree on the size and shape of the market opportunity?
Plan / Resources
- What milestones are critical for reaching the next inflection point?
- What resources—product roadmap, team, GTM strategy, and capital—are required?
- How does this stage prepare us for subsequent funding rounds?
Diligence, when done right, isn’t just about answers—it’s about building shared conviction before deciding to partner.
What’s Ahead in This Series
Below are the specific diligence exercises we most commonly see. Think of these posts as practical building blocks for creating clarity and alignment, both with investors and within your own team.
Diligence Exercise | What We’ll Cover |
---|---|
Post 1. Aligning on the Plan (this post) | Why this series exists, what diligence looks like at each stage, and how to set goals for the process. |
Post 2. Hair-on-Fire Problem + Why 10× Better | How to define who you’re selling to, what “hair on fire” problem they have, what they do today, what they will do with you instead, and why this is 10x better. |
Post 3. Market Sizing – “is this venture scale?” and why does it matter? | How we think about market size and why it’s critical to venture outcomes. Aligns on whether there’s a path to a $1B+ company—based on how many customers exist, what they’ll pay, and how big the market could become. |
Post 4. Hiring Plan – “Who should you hire when?” | Aligning on what the team needs to achieve product and GTM goals (and if fundraising, right-sizing the raise). |
Post 5. Financial Model | What we look for in a model: revenue, costs, burn, and how it ties to the round’s goals. |
Post 6. Product Roadmap | What you plan to build, how it connects to the value proposition, and the customer journey. |
Post 7. Cohort Analysis and sales payback (“do our unit economics work?”) | How we assess product-market fit and customer durability through cohorts. |
How Founders Should Think About Investor Diligence
- Skipping diligence can be risky. For pre-seed, diligence should be light. But if you are a seed stage company with $1M in ARR, or series A company, an investor who skips diligence all together is not necessarily better—it could even be a flag. Sometimes the investors already know you, know the space very well, or they’re just moving fast because of your fundraising round’s dynamics. But sometimes they’re guessing, making incorrect assumptions on your goals and vision, or simply cannot provide helpful feedback.
- Good questions predict good partnerships. Investors asking thoughtful questions early are likely to be more supportive when challenges arise later. If a firm isn’t asking questions, how do you know you’re aligned? What happens if you have different plans?
- Effective diligence sharpens your business. Seek investors who challenge your thinking constructively and make your plans stronger. The best partners will help you see around corners and get ahead of the problems you might face as you scale.
Key Takeaways on Startup Diligence for Founders
- Alignment beats mere approval. Diligence ensures both sides truly understand and agree on how they’ll work together.
- Clarity matters more than polish. The goal isn’t “passing a test”. Investors prefer clearly articulated, evolving plans over beautifully presented yet superficial materials.
- Our templates are starting points. Use our provided templates to accelerate your diligence process—but always adapt them to fit your unique context and story.
Next Post: Hair-on-Fire Problem and Why Is Your Solution 10x Better
In the next post, we’ll dig into how we think about clearly defining who your customer is, what hair on fire problem you’re solving, and how it’s 10x better.
We’ll cover:
- The underlying question and why it matters for every subsequent diligence exercise.
- Our shared method and framework—step by step, with a template
- A simple template you can use to create your own “hair-on-fire + 10x better” story