You've pitched. The investor is interested. They say the magic words: \"We'd like to move forward with due diligence.\"

This is where deals die quietly.

Due diligence is the investor's verification process. They're checking that everything you told them is true, that the company is legally sound, and that there are no hidden landmines. Most founders think of due diligence as a formality. It's not. It's a filter.

Here are the five issues that kill deals fastest.

Red Flag #1: Messy Cap Table

If your cap table doesn't add up, the conversation is over.

Common problems: shares that don't total 100%, SAFEs that weren't properly tracked, option grants without a formal plan, and phantom equity promises made verbally but never documented.

Investors need to know exactly who owns what. If you can't produce a clean cap table in 24 hours, they'll assume there are bigger organizational problems under the surface. And they're usually right.

Fix it: Use a cap table tool (Carta, Pulley, or even a well-maintained spreadsheet). Track every SAFE, option grant, and equity issuance. Update it after every transaction.

Red Flag #2: Missing IP Assignments

This one kills more deals than founders realize.

If anyone worked on your product—co-founders, contractors, employees—before signing an IP assignment agreement, the company might not actually own its own technology. Investors' lawyers check this immediately because it's a liability question.

The worst case: a former contractor claims ownership of the codebase. Even if they're wrong, the legal battle is expensive enough to tank an early-stage company.

Fix it: Get IP assignment agreements signed by everyone who contributed to the product. Do it retroactively if you have to. Do it before you start fundraising. Here's how this mistake costs founders real money.

Red Flag #3: Unresolved Co-Founder Issues

Investors can smell co-founder tension from across the table.

But the documented version is worse: no vesting schedule, no founders' agreement, unequal contribution without corresponding equity adjustments, or a departed co-founder who still holds a large equity stake.

A co-founder who left six months in with 25% of the company and no vesting is a ticking time bomb. Investors know this and will either pass or demand it be resolved before they wire money.

Fix it: Standard four-year vesting with a one-year cliff for all founders. If a co-founder has left, negotiate a buyback or restructure. Get it in writing.

Red Flag #4: Non-Standard SAFE Terms

If your existing SAFEs have unusual terms—side letters with special rights, non-standard conversion triggers, or investor veto provisions—new investors will worry about what other surprises are lurking.

The issue isn't that non-standard terms exist. It's that they signal the founder either didn't understand what they were signing or got pushed into bad terms. Neither inspires confidence. Here's a full breakdown of what standard SAFE terms look like.

Fix it: Use standard YC SAFE templates. If an investor wants modifications, have them reviewed by your lawyer. Know exactly what's in every agreement you've signed.

Red Flag #5: No Corporate Hygiene

This covers a range of issues: missing board resolutions, unfiled annual reports, lapsed business registrations, informal employment arrangements, and missing regulatory filings.

None of these are fatal individually. Together, they paint a picture of a company that doesn't take governance seriously. And if governance is sloppy, investors wonder what else is sloppy.

Fix it: Set up a simple corporate checklist. File your annual reports. Keep board minutes (even if the \"board\" is just you). Document major decisions. It takes an hour a month and saves you weeks during due diligence. AI tools can help you audit your corporate documents and flag gaps before investors do.

The Pattern

Notice what all five red flags have in common? They're all preventable. They all stem from skipping legal basics in the early days. And they all cost 10x more to fix during due diligence than they would have cost to get right from the start.

The founders who raise fastest are the ones who show up to due diligence with a clean room. No surprises. No scrambling. Just a well-organized company that's ready for investment.

Preparing for due diligence? Robaer can review your legal foundation before investors do.