Every angel group has the same challenge. Proper DD takes time — it slows down the decision-making process. Move fast and you're pricing risk on incomplete information. Good groups resolve it by making the process faster, without cutting what it actually checks.
DD isn't a search for reasons to say no — that's the path to talking yourselves out of good deals as often as bad ones. DD exists to price risk accurately: to find out what you're actually buying into before you commit capital you can't easily get back.
Imposing DD rigour
A properly run process covers 11 areas — skipping one doesn't save time, it moves the risk to post-investment, where it's far more expensive to deal with.
1. Company
Check details of the legal entity, registration number, registered address, founding history.
2. Team
Assess the founding team and key hires. Domain expertise, commercial experience, complementary skills, full-time commitment, and track record. Team is consistently the most important factor in early-stage investment: the business will change, but the team executing it largely will not.
3. Problem and solution
What problem the company solves for whom, and why it matters. How the company's products/services solve that problem in a way that delivers meaningful benefit to the customer. The more significant the problem and the more elegant the solution, the better the chance of success.
4. Market
The size and dynamics of the market the company is addressing. A large market with weak competition is ideal; a small market or one with dominant incumbents raises the barrier to a meaningful return. The pitch should also explain which segments the company will sell into initially. Tight focus in the early stages of growth is key.
5. Competitive position
How what the company offers compares with other solutions. Differentiation is an advantage but does not have to be product-based. Competitive advantage can come from cost, distribution, production or access to resources. Clear ownership of intellectual property may strengthen a company's competitive advantage.
6. Traction and customers
Evidence that the market is responding to the company's product or service. Paying customers, revenue growth, pipeline, partnerships, and letters of intent. Traction is the most reliable indicator of product-market fit and team execution capability.
7. Product and technology
What the product is, how developed it is, and whether customers value it. Customer validation, retention data, and product-market fit evidence. A product that customers pay for and return to is fundamentally de-risked compared to one that exists only as a prototype.
8. Business plan and strategy
How the company will make money. Revenue streams, pricing, unit economics, gross margin, and the sustainability of the commercial model. A company with a clear strategy is lower risk than one with an unproven or complex monetisation approach.
9. Financials and ask
The company's financial projections, funding sought and pre-money valuation, including the assumptions underpinning them and how they hold up under stress testing. Runway, burn rate, path to break-even, and the use of funds being raised. EIS/SEIS eligibility and advance assurance is critical for most angel investors.
10. Legal and governance
Company incorporation, cap table, shareholders' agreement, key contracts, regulatory compliance, and any outstanding litigation or disputes. Legal surprises late in DD are a common deal-killer, so this area should be investigated early.
11. Risk and decision
A synthesis of the key risks identified across all work packages, the mitigants available, and the overall investment case. This is the Project Lead's overall assessment — the WNTBB summary lives here.
From chaos to coherence
DD often breaks down because the information needed to make a judgement is scattered across email threads, with different versions in different inboxes and documents with multiple versions in different places. It's easy to lose track of answers and information that change in what is genuinely an iterative process.
What good looks like is boring, in the best sense: every deal goes through the same structure, whoever's leading it. The questions are asked the same way. The disclosures are kept somewhere every interested investor can easily find them, because those disclosures are what the eventual investment agreement relies on. With AngelHub's Ask AngelAI, it's much easier to test if an answer has a material impact on risk or valuation. If something turns out to be wrong later, whether it's covered by a warranty claim depends on whether it was properly disclosed and tested at DD stage.
Rigour and speed aren't actually opposed.
A group that runs a consistent, well-structured process moves faster than one that reinvents its DD approach every time, because nobody's rediscovering how to do this from scratch on deal fourteen. AngelHub brings that rigour to every deal.
David Jackson, Founder & CEO, Certitia