What investors ask during diligence

Diligence questions are mostly predictable. The ones that decide a round are about judgement and cannot be pre-answered; the rest are reconciliation, and every hour you spend answering those by email is an hour not spent on the first kind.

Work down this list and ask one thing of each: is the answer already a document in my room? If not, that question will arrive as an email at an inconvenient moment.

• “What is your runway?” Testing whether you know your own numbers, and whether the raise is timed from strength or desperation. Answer from monthly burn and the current bank balance, not from the model’s projection.
• “Why did burn change last quarter?” Testing whether you watch it. Every step change should have a named cause, a lease, a hiring wave, a one-off. An unexplained step reads as not looking.
• “Walk me from revenue to bank balance.” Testing whether your model reconciles to reality. This is where the model and the bank statements meet, and where discrepancies surface.
• “What are your unit economics?” Testing whether growth is worth funding. Be explicit about what is and is not loaded into CAC.
• “Revenue concentration?” Testing fragility. If one customer is a third of revenue, say so before they compute it.

• “Show me the fully diluted cap table.” Testing what they will actually own. Fully diluted, including the unissued ESOP pool and every convertible.
• “What is the ESOP pool and how much is granted?”Testing whether there is room to hire, and whether a top-up will dilute them at the next round.
• “Are founders vesting?” Testing whether a founder departure would leave dead equity on the table.
• “Any convertibles outstanding?” Testing for surprises in the post-money. Conversion mechanics should be in the room, not described verbally.
• “Is the register reconciled to issued certificates?”Testing whether the paperwork was kept. See the data room checklist. This is the one founders most often cannot produce.

• “Are your ROC filings current?” Annual returns, AOC-4, MGT-7. Late filings carry penalties and signal how the company is run.
• “Any outstanding statutory dues?” GST, TDS, PF, ESI. An open demand becomes an indemnity negotiation, so disclose it with a plan attached.
• “If you have foreign investment, are FEMA filings complete?”FC-GPR, valuation certificates, sectoral caps. Missing filings are a genuine closing condition.
• “Is IP assigned to the company?” From founders and from every contractor. Found unassigned in a large share of first institutional rounds, and much cheaper to fix before diligence than during it.
• “Any related-party transactions?” Disclose them yourself. They will be found, and being found undisclosed costs more than the transaction did.
• “Any litigation or notices?” Including the ones you think are trivial. Your judgement of triviality is not the thing being tested.

• “Why will you win?” Judgement. Not pre-answerable, and the real conversation.
• “What breaks at 10x?” Testing whether you have thought past the current quarter.
• “Who are the first ten hires after this round?”Testing whether the raise has a plan behind it or is just more time.
• “What is your churn, and why do they leave?” The second half matters more. Share cohort behaviour in aggregate, not a customer list, for the reasons in DPDP and your investor data room.

1. “What did you get wrong in the last 12 months?” A founder with no answer is either not reflecting or not telling the truth, and both are worse than the mistake.
2. “Which of your competitors worries you, and why?”“None” is the wrong answer in every market.
3. “What would make you shut this down?” Testing whether you have a falsifiable thesis or a belief.

Every question answered by email is answered outside the room, which has two costs. You write it again for the next investor, slightly differently, and the drift is what gets noticed. And there is no record of what was represented to whom, which matters if anything is later disputed.

This is what XDrop AI is for: investors ask in plain language and get answers assembled from the documents they were granted, each cited to the source document and page. The citation is the point, an investor can open the source and check, rather than taking an answer on trust. And because the access limit applies when the system searches, an investor who was not granted the founder vesting schedule gets told it is outside their access rather than getting a summary of it.

Every query is recorded too: who asked, which documents were retrieved, what was answered. Which means the thing you represented is reconstructable later, by you, not just by them.