Investor Due Diligence
For PE/VC funds, family offices, and angel investors evaluating opportunities
Investor DD is tailored for PE/VC funds, family offices, and institutional investors who need a thorough but stage-appropriate financial assessment of potential investments. Unlike traditional buy-side DD (which assumes control acquisition), investor DD focuses on minority protection, governance risks, fund deployment safeguards, and portfolio-level considerations.
Who Is This For
Venture capital funds (seed to growth stage), private equity funds, family offices, angel investor networks, and institutional investors evaluating minority or majority stakes.
Scope of Work
- Stage-Appropriate Earnings Analysis — from unit economics for early-stage to quality of earnings for growth-stage companies
- Governance & Promoter Risk — related-party transactions, fund diversion risk, personal vs business expense mixing, and promoter integrity indicators
- Fund Deployment Safeguards — recommended board-level controls, milestone-based disbursement structures, and financial covenant recommendations
- Cap Table & Equity Structure Review — existing shareholders, ESOP dilution, anti-dilution provisions, and liquidation preference stacking
Detailed Scope
What We Cover
Stage-Appropriate Earnings Analysis — from unit economics for early-stage to quality of earnings for growth-stage companies
Governance & Promoter Risk — related-party transactions, fund diversion risk, personal vs business expense mixing, and promoter integrity indicators
Fund Deployment Safeguards — recommended board-level controls, milestone-based disbursement structures, and financial covenant recommendations
Cap Table & Equity Structure Review — existing shareholders, ESOP dilution, anti-dilution provisions, and liquidation preference stacking
Compliance Health Score — GST, TDS, ROC filings, statutory audit status, and pending litigation review
Portfolio Impact Assessment — how the investment fits within the fund's existing portfolio from a risk, sector, and vintage perspective
How It Works
Our Process
Investment Context Review
Understand the fund's investment thesis, stage preference, ticket size, and specific concerns. Tailor the DD scope to match the stage and deal structure.
Financial & Governance Analysis
For early-stage: unit economics, burn, runway, cap table. For growth-stage: quality of earnings, working capital, compliance health, and promoter governance review.
Risk Identification & Safeguards
Identify deal-specific risks and recommend protective mechanisms — milestone disbursements, board-level controls, reporting covenants, and SHA/SHA provisions.
Investment Memo Support
Deliver a focused DD report suitable for the fund's investment committee, with clear risk-reward assessment and recommended deal structure modifications.
Proven Results
Case Studies
VC Fund — Series A Investment in SaaS Company
Challenge
A VC fund was evaluating a Rs 15 crore Series A investment in a SaaS company reporting Rs 8 crore ARR and 85% gross margin. The pitch deck showed strong metrics, but the fund wanted independent verification before committing, particularly around revenue quality and customer retention claims.
Our Solution
Conducted investor DD focused on SaaS-specific metrics: verified ARR by reconciling subscription contracts with bank receipts, analyzed customer cohort retention (not just headline churn), reviewed deferred revenue computation, assessed customer concentration risk (top 5 customers = 42% of revenue), and evaluated unit economics (CAC payback, LTV/CAC). Also reviewed promoter-related transactions and compliance status.
Result
Actual ARR was Rs 7.2 crore (10% lower than reported) after adjusting for annual contracts with cancellation clauses. Net revenue retention was 105% (vs claimed 120%) after accounting for downgrades. Customer concentration flagged as a risk — fund incorporated a customer diversification milestone into the SHA. Deal proceeded at adjusted valuation with proper safeguards.
Family Office — Growth-Stage Investment in Healthcare Chain
Challenge
A family office was considering a Rs 25 crore investment for a 20% stake in a healthcare chain with 4 clinics across 2 cities. Reported revenue was Rs 18 crore with 22% EBITDA margin. The family office needed DD to assess whether the profitability was real, sustainable, and scalable — and whether their minority investment would be protected.
Our Solution
Conducted investor DD covering clinic-wise profitability analysis (1 of 4 clinics was loss-making), doctor retention and revenue dependency (2 senior doctors accounted for 55% of revenue), related-party transactions (medical supplies purchased from promoter's other entity at above-market rates), cash handling practices (significant OPD collections in cash), and governance framework assessment.
Result
Consolidated EBITDA margin was 18% (vs reported 22%) after adjusting for above-market related-party purchases and normalizing for the loss-making clinic. Doctor dependency flagged as a key-person risk — fund insisted on retention agreements as part of the deal. Cash revenue proportion was documented with recommended controls. Investment structured with milestone-based tranches tied to clinic-level performance.
Angel Network — Pre-Seed Investment in Fintech Startup
Challenge
An angel investor network was evaluating a Rs 2 crore pre-seed investment in a fintech startup. At this stage, traditional FDD metrics (EBITDA, working capital) were irrelevant. The network needed a lightweight DD focused on fund utilization plan, promoter background, regulatory compliance (RBI/NBFC implications), and cap table cleanliness.
Our Solution
Conducted a focused investor DD covering: promoter background verification (directorships, litigation, credit checks), cap table review (existing SAFEs, convertible notes, and their dilution impact), regulatory assessment (whether the product required RBI registration), projected fund utilization plan vs runway analysis, and basic compliance check (incorporation documents, GST registration, pending filings).
Result
Identified that the startup's product model required an NBFC-P2P license, which was not in the promoter's plan or budget. Cap table had a previously issued SAFE with aggressive terms that would dilute new investors by 12% more than expected. Both issues were addressed — license application plan included in the fund utilization, and SAFE terms renegotiated before the angel round closed.
Disclaimer: As per the guidelines of the Institute of Chartered Accountants of India (ICAI), the names of clients cannot be disclosed. The case studies presented above are based on actual engagements, with client identities anonymized to comply with ICAI professional standards and maintain confidentiality.
Common Questions
Frequently Asked Questions
Buy-side DD typically assumes a control acquisition and focuses heavily on earnings quality and SPA mechanisms. Investor DD (especially for minority investments) focuses more on governance risks, promoter integrity, fund deployment safeguards, minority protection clauses, and stage-appropriate metrics (e.g., unit economics for early-stage vs EBITDA for growth-stage).
Explore More
Other FDD Services
Buy-Side Due Diligence
For acquirers and strategic buyers evaluating targets
Buy-side FDD is commissioned by the acquirer to independently verify the target company's financial health before committing capital. We identify risks, validate reported earnings, assess working capital adequacy, and uncover hidden liabilities — giving you the confidence to negotiate from a position of knowledge.
View DetailsSell-Side (Vendor) Due Diligence
For sellers and promoters preparing for exit or fundraise
Sell-side or vendor due diligence is commissioned by the seller before approaching buyers or investors. It proactively identifies and addresses issues that would otherwise surface during buyer's DD, accelerates the deal process, maintains seller credibility, and provides a vendor DD report that can be shared with multiple potential buyers simultaneously.
View DetailsNeed Investor Due Diligence?
Get a free consultation with our FDD specialists to discuss your specific deal requirements and timeline.