Blog Post Getting Ready For Fundraising

Finally, that magical word—Fundraising—enters our lives, and we’re getting ready to raise a lot of money. But before that happens and we start pouring money into all our “wants” and improving the product, there will be Due Diligence. That thing you can totally mess up, lose your price point in negotiations, inherit the burden of post-M&A/Fundraising risks, or even lose the entire project.

During my first DD, it felt like a pitching session about all the features and putting documents into neat folders. It turned out to be way messier than that.
Even if the product is strong and the metrics look great (and that’s clear from the outside), internally, nothing is visible. The bitter lesson? There was no structured evaluation or proper storage of this data. Everything was scattered across departments, stuck in people’s heads, and discussed in chats and meetings. But when it came to providing something to the auditors, there was nothing concrete. We ended up piecing things together chaotically, trying to squeeze several years into a short time frame, not fully understanding what was coming next.

Due Diligence is not pitching. More often, it’s exhausting work—not just for legal and finance, but for the entire team. You don’t just need to tell a great story with dazzling metrics—you have to identify the risks and understand what liabilities they might bring. If no assessments were ever done from the beginning, the complexity of the Due Diligence and the risks post-M&A will rise proportionally. Ignorance doesn’t excuse you 😉

📌 What gets assessed during Due Diligence:

• Product and features, roadmap, product localisation, data & AB testing culture.
• R&D: System architecture, tech stack & tools.
• Marketing metrics and unit economics.
• Business plan, customer acquisition, expansion and scaling, partnerships.
• Finance, taxation.
• Legal and risks.

And every one of these layers includes detailed reports, plans, and pitches to justify every metric and data point. Each section includes sub-sections, where sometimes you just dig through everything you’ve got, realising you never knew how it should even be done or what it should look like.

For every following DD I participated in, I always had a clear structure and “data folders” so I could deliver the right information quickly based on specific requests. I even asked our Devs to build a tool for me that auto-rolls up data into a format matching auditor questions—a kind of Data-Legal Hub (e.g., “Give me all contracts from thousands where there’s a margin restriction, or termination clause over a month, or where we can’t sell to locals in a certain region”).

And now, even when working with early-stage projects, I already conduct:

📌 Early-Stage Due Diligence.

This is an external audit of the product and the project’s operational model, as a company and sometimes as a group. It looks at not only what’s been built but also the potential paths of development, new markets, licenses, challenges, and, of course, risks.

💡 What does it look like?

Usually, it’s a structured report assessing various parts of the product, followed by a conclusion highlighting “gaps” (vulnerabilities) and offering recommendations. Depending on the project, the following areas might be assessed: business model, corporate governance, financial accounting, reporting (annual filings), legal compliance (even with just the business idea), licenses (open-source and regulatory), certification, privacy and cybersecurity, etc.

💡 Why do you need it?

1. It helps store data in a structured format so any manager or auditor can access what they need from a single source.
2. Risk management. Risks themselves aren’t the issue (they’re inevitable); the real danger is not knowing about them. Once a risk is identified, we can prepare to mitigate it—plan time, resources, and budget. And ideally, even pass some of that liability post-fundraising, instead of being stuck with the kind that will never be written off.
3. A ready-made audit opinion. These DD reports can serve as audit conclusions that strengthen your position for both customer acquisition strategy and investment rounds.

It’s your “Yes, we know what’s going on and where we can screw up” document. Once you have a structured file, it’s easier to argue your position, back up every evaluated metric, and reduce investor surprises, making the Disclosing stage smoother (more on that below).

📌 Disclosing: Exposing Vulnerabilities and Risks

So, you nailed your pitch. You made it through product, R&D, sales, and marketing DD. But something still goes wrong. Or maybe it doesn’t—it goes as it should: you sign the deal, list investors in preferred shares and Member Registers, and put your signature (hopefully not in blood) under every clause of liability and warranty, praying it never materialises. Oh, if only every startup really understood what they’re signing, especially in highly technical legal English!

And here comes the Achilles’ heel: Financial and Legal Due Diligence. Those very things we did while building the MVP are now substantial risks and have no expiration, either by law or under the Share Sale/Purchase Agreement. This vulnerable information is entered into a Disclosing Schedule, one of the core documents of fundraising and M&A deals.

💡 What is Disclosing?

Literally: disclosure of information. But not just any info—vulnerabilities. It’s where you describe product or operational omissions. If you’re an existing company, you probably have weak spots that could lead to liability, even if they’re well hidden from the authorities.

Investors want to know what vulnerabilities and risks are included in their share package, their significance, and whether they’re worth the deal’s price. 

The issue? You may not even be aware of all your risks, and therefore can’t disclose them. Some are not visible, and you may be 100% sure you did everything right… until it turns out you didn’t. Some risks are simply unwritable: taxes, regulatory reports, privacy, licenses, potential fines, etc.

💡 What to do? And how to protect yourself?

1. Hire professionals. Especially those who’ve actually gone through fundraising and M&A deals. It’s one thing to read a contract for the first time and “think” you’re doing it right. It’s another to have “eaten the dog” on this stuff—seeing not just text, but the consequences behind it.
2. Repeating it again: early-stage Due Diligence is gold. Knowing your risks early gives you a shot at offloading them smartly. Otherwise, investor-side auditors will find them and point right at your “sins”—when you thought you were just building a cool product.
3. Read the agreement carefully. And only a lawyer who’s gone through M&A deals and post-M&A cleanups can do that well. There are many nuances—price dumps even after a fundraising round, giving up rights if part of the deal is in equity (preemptive rights? forget about them), and the worst—guarantees and risks that might hit you after the deal.
4. Draft your Disclosing Schedules clearly and professionally. If you know a liability is material and needs to be marked as a potential risk/liability/deprivation, work on the strategy—negotiate the risk-sharing ratio (at least 20/80, not full responsibility on you if something pops up post-deal).
5. See fundraising not as fast cash but as a product investment and transformation process. As much as we’d love to think otherwise, fundraising isn’t free money. It’s commitments with responsibility—fast money exchanged for warranties and the future. This process needs preparation: lawyers, auditors, and team bandwidth. That way, we cut the illusions and realise this is a complex product that requires serious resources.

The better your preparation, the stronger your position—and the higher your deal valuation!

The article is available in Russian on our Telegram Channel.