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Early Stage Diligence in Emerging VC

Diligence is how conviction is built. It’s the process of confirming the claims that piqued your interest in the first place — and uncovering red flags — before committing capital. 
The goal isn’t to eliminate all risk; it’s to understand the right risks to take.
There is no one-size-fits-all early-stage diligence checklist. Every early-stage emerging VC fund will (and should) have their own diligence process. This article explains how to align diligence with your thesis, adapt it for early-stage startups, and use structure to move quickly and confidently.

Use Your Thesis to Guide Your Diligence

Your thesis defines where to dig deep and what to skip.
  • Focus on what matters. Identify the few elements that truly drive value for your thesis. This differs from firm to firm. It might be technology, founder capability, market size, defensibility, traction, or another element.
  • Customize your questions. Design your diligence checklist to uncover the risks and signals specific to your investment lens.
  • Cut the noise. Avoid irrelevant deep dives. If your thesis centers on technical innovation, spend time on the tech review, not 10-page customer surveys.
Example: A deep-tech fund allocates 70% of diligence time to technical evaluation — patents, R&D capacity, and defensibility — while minimizing early financial modeling.

Early-Stage Diligence is Different

At the pre-seed and seed stages, diligence must be fast, focused, and right-sized.
  • Skip the checklists. Series A-style data requests overwhelm early founders and waste time.
  • Validate what drew you in. Early-stage diligence is about confirming the few signals that sparked your interest, whether it’s strong user love, organic growth, or a founder’s unique insight, and checking that those signals are real and repeatable.
  • Keep it human. Talk to people, not just data: founders, users, and partners reveal more than models do.
Example: A pre-seed investor is drawn to a startup showing unusually high referral rates, strong user satisfaction, and low churn. During diligence, they focus entirely on validating these signals, interviewing customers, reviewing usage data, and verifying retention metrics. This helps them confirm whether the traction is real or just noise.

Structure Your Diligence Process

A defined structure builds efficiency, consistency, and trust with founders.
  • Document the flow. Outline each step: internal review, founder call, external checks. Set timelines.
  • Bring in expertise. Engage domain specialists, legal counsel, or market analysts where you lack depth.
  • Control the clock. Use clear deadlines to prevent drawn-out diligence and signal professionalism.
Example: A VC builds a thesis-based diligence template covering technology, competition, and founder references. The fund cuts diligence time by 25% while improving clarity and confidence.

Craft a Deal Memo that Showcases Your Process

A great deal memo isn’t just a summary—it’s proof of thought. It captures how you built conviction, what you discovered, and why the opportunity fits your thesis.
  • Show your reasoning. Document how you evaluated the company, what questions you asked, and how each answer shaped your view.
  • Synthesize insights. Highlight the key findings, the risks you’re accepting, and the rationale behind your final stance.
  • Use it as a mirror. Review past memos regularly to see where your judgment was sharp, or where bias crept in.
  • Leverage it externally. A well-crafted memo can demonstrate to LPs your discipline, your process, and the quality of your dealflow.
Example: After diligencing an edtech startup, a fund memo highlights strong founder-market fit, 10,000 active users, and a $15B TAM. The memo also flags reliance on a single distribution channel. The memo clearly traces the fund’s process from thesis alignment through risk analysis, enabling a decisive IC discussion and serving later as a proof of process.

The Bottom Line

Diligence isn’t paperwork. It’s precision. When shaped by your thesis, tailored to stage, and executed through structure, it helps you make faster, sharper, more confident investment decisions.
With conviction documented and clarity in hand, you’re ready for the next step - selecting and committing to deals aligned with your strategy.

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