THE DUE DILIGENCE DIVIDE: WHERE STARTUPS WIN OR LOSE INVESTOR TRUST

Priyanka Madnani, Founder & CEO, Terex Ventures Priyanka has over ten years of experience as a startup advisor and pitch expert, both in India and on global platforms, assisting more than 10,000 startups in transforming their ideas into compelling pitch narratives through her brand. Previously, she was the founder of Easy To Pitch, a firm supported by Venture Catalyst that concentrated on preparing founders to deliver effective pitches, and she has now transitioned to Terex Ventures, based in Dubai.

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In the past two years, over 28,000 startups in India have shut down. Most did not fail due to lack of funding, but because their operations were not strong enough. While 2019 to 2022 saw thousands of startups begin each year, new startup formation has slowed sharply in 2024.

Many companies are being filtered out before they even reach funding stages, often during early due diligence.

As per a report by Sequoia Surge Insights, "Startups that pass due diligence with zero flags have a 3x higher chance of getting follow-on funding." Founders who approach investors with only a presentation and no operational readiness often do not make it through. Investors now expect more.

They want to see whether a founder has a plan for building and managing a company, not just an idea.

Due Diligence Goes Beyond Legal and Finance

Earlier, due diligence mostly meant reviewing financials and legal paperwork. Today, it includes evaluating how a startup operates.

Investors are checking product readiness, business models, early customer data, and even hiring strategy.

Interestingly as per a Bain India VC Report 2023, it was observed that "Due diligence isn't just financial anymore and 65 percent of VCs look at founder reputation, team dynamics, and ESG practices.