DocSend Newsletter - Due diligence red flags you should know

This week, we'll take a closer look at how to identify red flags in the due diligence process and how to approach investor outreach for maximum success.

4 due diligence red flags you need to know

Due diligence is stressful and overwhelming for founders. It means someone else is going to take a good, hard look at the guts of your business. Red flags come up all the time and sometimes the smallest missteps can make the difference between a massive injection of funding, a lower offer, or a hard pass.

To help you avoid these missteps, we’ve come up with the most common red flags VCs care about the most. You’ll learn what they are and how to address them if they come up.

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Pitch deck interest metrics

Founder and investor activity both spiked last week as the busy start to 2024 continued. Investor activity rose by 17.46% and the average time spent reviewing decks was once again unchanged at 2 minutes, 30 seconds. From a year-over-year perspective, VC activity is currently outpacing 2023 by 28%, 2022 by 5%, and 2021 by 24%. Founder activity was no less robust last week: it rose by 32.29% and is outpacing 2023 by 41%, 2022 by 13%, and 2021 by 65%. Encouraging macro data suggesting that a soft landing for the economy is within reach may be fueling some of the enthusiasm we’re seeing in the private markets so far this year. Although both sides of the dealmaking table will take a needed breather at some point, we expect these positive YoY comparisons to hold somewhat steady as long as the macro outlook remains unchanged. Check back next week to see whether founders and investors managed to keep up the pace.

Investor outreach do’s and don'ts

If you’re a founder with a great idea and not much of a network, figuring out where to start can be overwhelming. Cold emailing to cold leads with an email template swiped from LinkedIn is not only a grind, but can diminish your chances of success. you’re absolutely right.

We share expert tips on investor outreach, so you can skip some of the trial-and-error and raise your round faster.

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