Due diligence questions for startups: how to answer them

The diligence list lands on a Friday evening, in one long email. Answer it completely by Monday and your round keeps moving; answer it slowly and you give the investor a week to cool.

Rounds are scarcer than they were. Indian tech companies closed 1,134 funding rounds in the first nine months of 2026, down 38% from 1,838 a year earlier, according to Tracxn data as reported by CXOToday. That count covers tech startups only. Still, the direction is plain: when fewer rounds close, every diligence list you reach is worth more, and the way you answer it is part of the pitch. The documents themselves are in our due diligence checklist for Indian founders. This post is about the answers.

What investors ask in due diligence

Investors ask due diligence questions in six areas: the founder, the market, the cap table, legal, client agreements and compliance. The wording changes from one investor to the next. The areas don't. If you prepare an answer and a document for each area before the list arrives, most of the list is already done.

The work is real on their side too. In a survey of 885 venture capitalists, Gompers and his co-authors found the average firm spent 118 hours on due diligence for a deal and called 10 references. Those firms are mostly American, and nobody publishes the Indian equivalent. But you can read the lesson anyway. Your answers either save an investor hours or cost them hours. They'll notice which.

The questions, and how to answer each

Each area has one question underneath every variation of it. Answer that question directly, attach the proof, and flag anything that doesn't fit. Here's the question, and what a strong answer contains.

1. "Who are you, and who will vouch for you?"

They want your record, checked by people you didn't pick. Give degrees, past roles and how each one ended, plainly. Offer references beyond your friendliest ones: a former co-founder, an early employee, a customer who left. They'll call them anyway. Keep a one-page founder record ready, because you'll send it more than once. Here's who investors call and what they ask.

2. "How did you size the market?"

Show the bottom-up math on one page. How many customers like yours exist, what one pays in a year, how many your current team can reach. If your market number only works top-down, say so and give the bottom-up figure next to it. Our note on how investors test market size claims shows the checks you'll face.

3. "Does your cap table agree with your filings?"

Send the cap table with the register of members and the return of allotment for every issue. If you took application money, section 42 of the Companies Act, 2013 expected you to allot within 60 days or refund within 15 days after that. Late? Say it before they spot it. Our guide to cleaning up your cap table covers the fixes.

4. "Does the company own what it sells?"

Attach the IP assignment from each founder and every contractor who wrote code or designs. Code you wrote before incorporation belongs to you, not the company, until you sign it over. Then list any dispute, notice or claim. Even a small one.

5. "Show me the contracts behind this revenue."

Give a revenue table that ties each contract to its invoices and each invoice to a bank receipt. Separate signed contracts from pilots. Name your concentration: if one client is half your revenue, write that in the first line, not the fifth. This is how investors verify revenue and client contracts.

6. "Are your filings up to date?"

List your ROC filings with their dates. Under the Companies Act, financial statements go to the Registrar within 30 days of the annual general meeting (section 137) and the annual return within 60 days of it (section 92). Add GST returns and TDS. If anything slipped, show the corrected filing.

How to write the reply

Write the reply in the investor's own numbering, with one answer and one document link per question, and a dated note for anything that's still missing. Keep it plain. A reply the investor's analyst can tick off in one sitting does more for your round than a polished deck.

• Mirror the numbering. Their question twelve gets your answer twelve, even when two questions overlap.
• Link the proof. Every answer points to one file in your data room.
• Date the gaps. "Not filed yet; it goes in next Tuesday" beats silence.
• Bad news first. Put the hard answer at the top of its section.
• One owner. One person on your side sends every reply, so nothing contradicts.

Then offer a short call. Walk the investor through the hard answers yourself, before their analyst reaches them. You'll learn which questions actually matter to this fund. They'll learn how you handle pressure.

A second list may follow the first. That's a good sign: it means somebody read your answers. Continue the same numbering in the same email thread, so the whole record sits in one place when their partners review it.

Investors forgive a late filing faster than a late answer.

What to do before the list arrives

Build the answers now, while nobody's waiting on them. Draft one paragraph per area, attach the documents and keep both in a data room you update monthly. When the list comes, you're editing, not starting.

Start with the folder structure in our data room checklist for startups. MyStartupValley evaluates every startup on the same six due diligence parameters, and on MSV Founders you prepare that evidence in your own dedicated workspace before an investor asks for it. See how founders get ready to raise.

Questions

What questions do investors ask during startup due diligence?

Expect questions in six areas: who the founders are and who will vouch for them, how the market was sized, whether the cap table agrees with company filings, whether the company owns its IP, which contracts back the revenue, and whether ROC, GST and tax filings are up to date.

How quickly should a founder answer due diligence questions?

As fast as you can answer completely, ideally within a few working days. A partial reply that leaves questions open usually slows a round more than a complete reply a day later. Send what you have, list what is missing and give a date for each missing item.

What if a startup has a compliance gap during due diligence?

Say so in your answer, explain how it happened and show the fix with a date. Late filings can often be corrected by filing the form and paying additional fees. Investors tend to weigh how the founder handled the gap as much as the gap itself.

Sources: Tracxn, India Tech 9M 2026 report, as reported by CXOToday, 24 Sep 2026 · Government of India, India Code, The Companies Act 2013 (sections 42, 92 and 137), checked 5 Nov 2026 · Gompers, Gornall, Kaplan and Strebulaev, How Do Venture Capitalists Make Decisions?, NBER Working Paper 22587, 2016