Due diligence for angel investors: the full checklist
By TechAngels · Published 17 July 2026
Angel due diligence tests the claims that matter to an investment decision. It cannot prove that a startup will succeed, and a short review cannot establish that every undisclosed problem is absent. Its purpose is to compare the pitch with evidence, identify risks and record what remains unknown before money is committed.
Size the effort to the cheque
The scope should reflect the investment and the maturity of the company. A pre-seed business may not have audited accounts, a paid data room or a legal team, so copying an institutional acquisition checklist wastes time and produces false comfort. Scale the commercial analysis accordingly, but never skip the minimum legal, ownership and tax checks; a small cheque does not make a broken cap table or an insolvency proceeding less serious.
At pre-seed and seed, the record is short and much of the decision remains judgement. Decide in advance which findings would stop the investment, which could be addressed in the documents and which risks you are knowingly accepting. The final note should distinguish verified facts, founder representations and open questions.
Team
The team is where most of your money is riding, so it gets most of your diligence. You are testing two things: are these people who they say they are, and can they build and sell this.
Ask for and check: LinkedIn and CVs against what they claimed in the pitch; two or three references you source yourself, not only the ones they offer (a former manager, a co-founder from a past company, an early customer); and the story of any previous startup, including how it ended and what happened to the other people involved. Ask each founder directly why they are the person to win this market, and ask what they got wrong in the last twelve months; a founder who cannot name a mistake is either not reflective or not honest.
Then look at the cap table for sanity. Ask for the current shareholder split and any option pool. Two patterns end conversations: a founder who has already given away most of the equity to non-operating early backers or a “startup studio”, leaving too little to keep the team motivated through several dilutive rounds; and a departed co-founder still holding a large passive stake. Confirm the founders are on vesting, ideally four years with a one-year cliff, so that someone who leaves early does not walk away with dead equity on the cap table. If founder vesting is absent, that is a term to add, not necessarily a reason to pass.
Market
Market diligence tests whether the opportunity is as big and as reachable as the pitch claims. Founders almost always present a top-down number (“the global X market is €40bn”); your job is to rebuild it bottom-up. How many customers exist who have this problem, what would each realistically pay, and what share could this company reach in five years. If the bottom-up number is a small fraction of the slide, that is not fraud, but it changes the return math.
Check the competition rather than relying on the “no competitors” slide. Include direct products, indirect alternatives and the customer’s option to do nothing. Ask what has changed in technology, regulation, cost or behaviour to make adoption plausible now. An unconvincing answer does not prove that the market rejected the idea, but it should reduce confidence in the timing argument.
Product
Product diligence is lighter at angel stage because the product is early, but you still want to see it work. Get a live demo, not a slide deck of the product, and ideally use it yourself. Ask to see real usage: how many people use it, how often, and what they do with it. Even a handful of genuinely engaged users tells you more than a large waitlist.
If the company is technical and you are not, this is where a second angel with the right background earns their place (see shared diligence below). The technical review does not need to be an audit; it needs to answer whether the thing is really built, whether it can scale in principle, and whether the hard part is actually hard. On IP, confirm the basics: who owns the code and any trademarks, that past contractors and employees assigned their work to the company in writing, and that nothing core was left behind at a founder’s previous employer.
Financials
At this stage financial diligence is about survival and honesty, not a discounted cash-flow model. Ask for a simple picture: current cash in the bank, monthly burn, and the runway those two imply. Then ask what the round buys, meaning which specific milestones the money is meant to reach and whether the amount raised is enough to reach them with margin. A round that funds only nine months of runway to hit an eighteen-month milestone is a problem you can see before you invest.
Where there is revenue, sanity-check the unit economics: what it costs to acquire a customer, what that customer is worth over time, and whether the gap is heading the right way. Where there is no revenue, say so plainly rather than dressing up a pipeline as traction. Finally, ask for existing commitments that a pitch tends to omit: outstanding loans or convertible notes, deferred founder salaries, grants with strings attached, and any revenue already promised to a lender or partner. These sit ahead of you in line and change what your equity is actually worth.
Legal
Legal diligence at angel stage is a focused set of checks, not a full legal audit, but it is the area where a missed item can be expensive. Treat this section as a list of questions to put to a lawyer, not as legal advice.
Confirm the company is properly incorporated and that the people signing are entitled to sign. Read the existing shareholders’ agreement and articles if there is one, looking for anything that binds a new investor: pre-emption rights, drag-along and tag-along terms, and any unusual founder control or exit provisions. Ask directly about pending or threatened disputes, unpaid taxes, and any regulatory permission the business needs to operate legally.
For a Romanian company, verify the basics against public records before you sign: the company’s registration and standing in the trade registry (ONRC), insolvency proceedings in the insolvency bulletin (BPI), tax standing with ANAF, pending litigation in the courts portal, and trademark or IP registrations where the business depends on them. Your lawyer runs these checks routinely, and can also confirm whether Legea 120/2015 and its tax facilities apply to your investment.
Red flags versus yellow flags
Separate findings that stop a deal from risks that can be negotiated or consciously accepted. A material misrepresentation, numbers that do not survive reconciliation, an ownership problem that cannot be fixed, an undisclosed dispute or tax liability, or repeated evasiveness may justify stopping the process. A deliberate false statement also changes the weight that can be placed on every other unsupported representation.
A yellow flag is a reason to negotiate, not to leave: no founder vesting yet, a valuation that is high but arguable, a thin cap table you can help rebuild, a market smaller than claimed but still worth the bet, a key hire still missing. Yellow flags are what term sheets and honest conversations are for. The skill is telling the two apart, and the tie-breaker is usually how the founders respond when you raise the issue.
How a group shares the work
You do not have to do all five areas alone, and in an angel network you should not. Shared due diligence means splitting the areas by member expertise: the operator who has scaled a sales team takes market and unit economics, the engineer takes the product and technical review, the member who has closed deals in the sector takes legal and references. Each person goes deep on their area rather than everyone skimming all five.
The output is a shared facts sheet: one document where each reviewer records what they checked, what they found, and their open questions, so every interested angel decides on the same verified picture rather than on a partial impression. In the TechAngels process, this is how a syndicate reaches conviction together after a startup is matched with interested angels, and it keeps a single small cheque from having to carry a full week of one person’s work.
The diligence record
A useful output is short enough to be read and specific enough to be challenged. For every material issue, record the claim, evidence reviewed, reviewer, finding, consequence and status.
| Field | Example |
|---|---|
| Claim | “All code is owned by the company” |
| Evidence | Employment and contractor IP-assignment clauses |
| Finding | Current contracts assign IP; one older contractor agreement is missing |
| Consequence | Obtain an assignment before closing |
| Status | Open, resolved or accepted risk |
Link the source documents instead of paraphrasing from memory. Date the note, since cash, ownership and litigation status can change between the first review and closing.
The final investment decision should explain why the expected return justifies the risks that remain. A term sheet can allocate or condition some risks, but it cannot repair weak demand or make an untrustworthy founder trustworthy.
In a syndicated round, members can divide work by expertise and maintain one factual record. Each investor should still understand its limitations and read the documents they sign. Romanian legal, tax and regulatory conclusions should be confirmed by qualified advisers; this checklist is educational, not legal advice.