Due Diligence Data Room Skill

Data Room Structure

Standard folder taxonomy used by institutional investors and M&A advisors:

/DataRoom
├── 01_Corporate
│   ├── Certificate of Incorporation (current + all amendments)
│   ├── Bylaws / Operating Agreement
│   ├── Board Resolutions (key actions last 3 years)
│   ├── Organizational Chart
│   └── Subsidiaries & Foreign Qualifications
│
├── 02_Financial
│   ├── Financial Statements (3 years audited or reviewed)
│   ├── Management Accounts (latest 12 months, monthly)
│   ├── Financial Model (base/bear/bull scenarios)
│   ├── Tax Returns (3 years federal + state)
│   ├── Accounts Receivable Aging
│   ├── Accounts Payable Aging
│   └── Bank Statements (6–12 months)
│
├── 03_Cap_Table
│   ├── Cap Table (fully diluted, current)
│   ├── Stock Option Plan (ISO/NSO plan document)
│   ├── Option Grants (individual grant summaries)
│   ├── SAFE Agreements (all outstanding)
│   ├── Convertible Notes (all outstanding)
│   ├── Investor Rights Agreement
│   ├── Right of First Refusal Agreement
│   └── 409A Valuation (most recent)
│
├── 04_Contracts_Commercial
│   ├── Customer Contracts (top 10 by revenue)
│   ├── Vendor/Supplier Agreements (key dependencies)
│   ├── Partnership Agreements
│   ├── Distribution Agreements
│   └── LOIs / MOUs (current)
│
├── 05_Intellectual_Property
│   ├── Patent Applications & Grants
│   ├── Trademark Registrations
│   ├── Copyright Registrations
│   ├── Trade Secret Policy
│   ├── IP Assignment Agreements (founders + employees)
│   └── Open Source Policy + License Inventory
│
├── 06_HR_People
│   ├── Employee List (names, titles, start dates, salaries)
│   ├── Offer Letters (key hires / executives)
│   ├── Employment Agreements (exec NDAs, non-competes)
│   ├── Contractor/1099 List + Agreements
│   ├── Benefits Summary Plan Document
│   ├── PEO/Payroll Provider Agreement
│   └── Org Chart (people version)
│
├── 07_Legal_Compliance
│   ├── Litigation History (pending, settled, threatened)
│   ├── Regulatory Licenses / Permits
│   ├── Privacy Policy + Terms of Service
│   ├── GDPR / CCPA Compliance Documentation
│   ├── Data Processing Agreements (key vendors)
│   └── Insurance Policies (D&O, E&O, Cyber, General Liability)
│
├── 08_Technical
│   ├── Architecture Diagram (system overview)
│   ├── Tech Stack Summary
│   ├── Security Audit Reports (penetration tests, SOC 2)
│   ├── Uptime / SLA History
│   ├── Disaster Recovery Plan
│   └── Data Handling / Privacy Architecture
│
└── 09_Business_Overview
    ├── Pitch Deck (current investor version)
    ├── Executive Summary / One-Pager
    ├── Product Roadmap
    ├── Customer References (top clients)
    └── Market Research / Competitive Analysis

DD Readiness Scoring

Score each category 0–100 based on document completeness:

Overall Readiness Score:

Score = Σ (Category Score × Category Weight)

Interpretation:
  90–100: Investor-ready. Proceed.
  75–89:  1–2 week gap closure. Flag gaps to founder.
  50–74:  2–4 weeks work. Significant gaps present.
  <50:    Not ready. Build foundational documents first.

Gap Analysis Output

When auditing an existing data room, produce a gap report in this format:

DUE DILIGENCE READINESS REPORT
Company: [Name]
Date: [Date]
Assessed by: Sam Ledger / PrecisionLedger

OVERALL SCORE: 72/100 — Needs 2–3 Weeks of Work

CATEGORY BREAKDOWN:
┌─────────────────────┬───────┬────────────────────────────────────────────────┐
│ Category            │ Score │ Missing / At Risk                              │
├─────────────────────┼───────┼────────────────────────────────────────────────┤
│ Corporate           │ 90%   │ Missing: Foreign qualification (Delaware co)   │
│ Financial           │ 65%   │ Missing: Audited statements, 409A outdated     │
│ Cap Table           │ 80%   │ Missing: 2 SAFE agreements not countersigned   │
│ Commercial          │ 70%   │ Missing: Contracts for 3 of top 10 customers   │
│ IP                  │ 55%   │ Missing: IP assignment from 1 co-founder       │
│ HR/People           │ 85%   │ Minor: Outdated offer letters for 2 eng hires  │
│ Legal               │ 90%   │ OK                                             │
│ Technical           │ 60%   │ Missing: Pen test report, no SLA documentation │
└─────────────────────┴───────┴────────────────────────────────────────────────┘

CRITICAL GAPS (will stall deal):
1. IP Assignment from co-founder [Name] — get signed before outreach
2. 409A valuation — expired 18+ months ago, investor will flag
3. Audited financials — Series A investors typically require 1 year audit minimum

HIGH PRIORITY (2-week fix):
4. SAFE countersignatures — pull originals, chase signatories
5. Missing customer contracts — get NDAs or MSAs on file

MEDIUM PRIORITY (can fix in parallel):
6. Foreign qualification certificate from Delaware
7. Pen test report — schedule if not done
8. Offer letter refresh for recent eng hires

RECOMMENDED NEXT STEPS:
Week 1: Resolve Critical Gaps (IP assignment, 409A, audited financials)
Week 2: High Priority items
Week 3: Full review + data room QA pass

Document Checklist by Round Type

SAFE / Pre-Seed Round (Minimal DD)

□ Certificate of Incorporation
□ Cap table (current, all SAFEs included)
□ Financial model or pitch deck financials
□ SAFE template to be signed
□ Founders' IP assignments
□ Bank statements (3 months)

Series A (Full Institutional DD)

All folders above, plus:

□ Audited financials (1 year minimum, 2 preferred)
□ Monthly management accounts (last 12 months)
□ 409A valuation (< 12 months old)
□ Board minutes for all major decisions
□ Fully diluted cap table (with option pool)
□ All outstanding convertible instruments (SAFEs, notes)
□ Customer contracts (top 10 by revenue)
□ IP assignments (all founders, key employees, contractors)
□ Employment agreements (all executives)

M&A Sell-Side

All Series A above, plus:

□ 3 years tax returns (federal + state)
□ Historical financial statements (3–5 years)
□ All material contracts (customer, vendor, partnership)
□ Litigation history (last 5 years, including settled)
□ Environmental compliance (if applicable)
□ Real property leases
□ Insurance policies with coverage limits
□ Employee benefit plan documents (401k, health)
□ Change of control provisions in key contracts
□ Government contracts or regulated agreements

Step-by-Step Workflow

Step 1: Scope the DD Type

Determine:

• Type: Fundraising (which stage?) or M&A (sell-side or buy-side)?
• Timeline: When is the investor/acquirer expecting access?
• Audience: Who is reviewing? (VC, PE, strategic acquirer, family office?)

Step 2: Intake Audit

Ask the founder/CFO to share:

• Existing data room link or folder structure
• List of what's been prepared vs. not started
• Any known legal issues (pending litigation, IP disputes)
• Outstanding cap table instruments (unconverted SAFEs, notes)

Step 3: Build Gap Report

Map what exists against the master checklist above. Score each category. Flag critical gaps (deal-stoppers) vs. nice-to-haves.

Step 4: Prioritize

Sequence by:

1. Deal-stoppers first (IP assignments, 409A, audited financials)
2. Investor-specific asks (some VCs have custom checklists — get theirs)
3. Everything else in parallel

Step 5: Draft Document Summaries

For key documents, produce a 3-line summary:

• What it is
• What it says (key terms)
• Any red flags or notes for investor

Step 6: Build the Data Room Index

Produce a master index document:

DATA ROOM INDEX — [Company Name]
Last Updated: [Date]

Section 1: Corporate
  1.1 Certificate of Incorporation (Delaware, 2022) ✓
  1.2 Certificate of Amendment — Series Seed (2024) ✓
  1.3 Bylaws (as amended 2024) ✓
  1.4 Board Resolutions — [Summary] ✓
  1.5 Foreign Qualification — California [MISSING]

Section 2: Financial
  2.1 2023 Audited Financial Statements ✓
  2.2 2024 Management Accounts (Jan–Dec) ✓
  2.3 2025 YTD Management Accounts ✓
  2.4 Financial Model (Base/Bear/Bull, 36 months) ✓
  2.5 2022–2024 Federal Tax Returns ✓
  2.6 AR Aging Report (as of [Date]) ✓
...

Step 7: Final QA Pass

Before opening data room access:

• All files named consistently (no "final_FINAL_v3.pdf")
• No personal employee info visible to all viewers (use sub-folders with tiered permissions)
• Sensitive items (bank statements, SSNs) restricted to appropriate viewers
• Index document is current and matches folder contents
• Watermarks on sensitive docs if required

Example Interaction

User: "Our Series A investor wants data room access in 2 weeks. We've never set one up. Where do we start?"

Sam's response:

Two weeks is tight but doable if we move fast. Here's the triage plan:

FIRST 48 HOURS — Stop everything else, get these:

1. IP Assignments — every founder and early contractor must sign.
   This is the #1 deal-killer. I'll need: names of all founders,
   date company was incorporated, names of any early freelancers
   who touched the product.

2. Cap Table — send me whatever you have (spreadsheet, Carta export).
   I'll audit it and identify any missing countersignatures.

3. Financial Statements — do you have a CPA? If yes, request
   management-reviewed or compiled statements for 2023 + 2024.
   Full audit takes weeks — we'll flag the gap and provide reviewed.

THIS WEEK — Collect in parallel:
   □ All customer contracts (even just the signed MSAs/SOWs)
   □ Certificate of Incorporation + any amendments
   □ Board minutes (any major funding, equity, or officer decisions)
   □ Existing insurance policies (D&O is the critical one)

NEXT WEEK — Build + QA:
   □ I'll build the data room index and folder structure
   □ Financial model review and clean-up
   □ Full gap report for investor

What platform are you using for the data room? (Notion, Google Drive,
Carta Data Room, Caplinked, DocSend?) I'll tailor the structure.

Platform-Specific Notes

Red Flags to Surface to Counsel

When auditing documents, flag these immediately — do not attempt to resolve without legal:

⚠️  Missing IP assignment from any co-founder or early employee
⚠️  Pending or threatened litigation not previously disclosed
⚠️  Customer contract with change-of-control clause (may block M&A)
⚠️  Government contract with anti-assignment provision
⚠️  Open-source license with copyleft (GPL) in commercial product
⚠️  Options granted below 409A fair market value (IRS issue)
⚠️  SAFE or note with full-ratchet anti-dilution (rare, toxic)
⚠️  Non-compete clauses in jurisdictions where they're unenforceable
⚠️  Data breach history not yet disclosed
⚠️  Expired regulatory license or lapsed compliance certification

Integration Points

• startup-financial-model — generate or audit the financial model included in Section 02
• cap-table-manager — build or reconcile the fully-diluted cap table for Section 03
• contract-review-agent — summarize and flag key customer/vendor contracts for Section 04
• kpi-alert-system — once funded, monitor key metrics investors will track post-close
• report-generator — format the gap report into an investor-ready PDF memo

Reference: Series A Investor DD Checklist (Condensed)

FINANCIAL
□ 3 years financial statements (audited preferred, reviewed acceptable)
□ YTD management accounts (monthly, current)
□ 36-month financial model with assumptions
□ AR aging + top 10 customer concentration
□ Tax returns (2 years minimum)

LEGAL / CORPORATE
□ Certificate of Incorporation + all amendments
□ Bylaws (as amended)
□ Board minutes (major resolutions)
□ All equity/instrument agreements (SAFEs, notes, stock plan)
□ Fully diluted cap table
□ 409A valuation (< 12 months)

COMMERCIAL
□ Top 10 customer contracts
□ Key vendor/dependency agreements
□ Any exclusivity, MFN, or anti-assignment clauses flagged

PEOPLE
□ Employee census (name, title, start date, salary, equity)
□ Executive offer letters and employment agreements
□ Option grant ledger
□ Independent contractor agreements (key ones)

IP
□ IP assignment agreements (all founders, employees, contractors)
□ Patent / trademark filings
□ Open-source license inventory
□ Trade secret policy

TECHNICAL / SECURITY
□ System architecture overview
□ Security audit or pen test (< 18 months)
□ SOC 2 / ISO 27001 (if applicable)
□ Uptime / incident history