Legal due diligence for a startup.
Legal due diligence is counsel checking that the company was formed properly, that every share and option was approved and issued correctly, that contracts allow the deal, and that there are no hidden disputes or liabilities. A complete corporate minute book and a cap table that ties to signed documents settle most of it.
Legal due diligence room
- 01 Formation
- 02 Good standing
- 03 Minute book
- 04 Equity
- 05 Financing history
- 06 Material contracts
- 07 IP
How it works for a startup.
Investor counsel runs legal diligence in every priced round, and its findings feed straight into the disclosure schedule attached to the stock purchase agreement. In an acquisition the buyer's lawyers go deeper and the findings become representations, indemnities and sometimes a lower price or a holdback.
Counsel reads in a set order: formation and charter documents, every board and stockholder consent, every equity issuance, then material contracts, IP, employment and litigation. A common US startup problem is equity that was promised in an offer letter or an email but never approved by the board, or options granted without a current 409A valuation.
Your own startup lawyer is your partner in this. Ask them to review the room before investor counsel sees it and to prepare a first draft of the disclosure schedule, which forces every exception into the open early.
Top 10 data rooms for this job.
Our five measures, re-weighted for legal due diligence. Places 11 to 17 are listed below the cards.
- Setup speed 18%
- Investor experience 16%
- Access control 26%
- Diligence tools 23%
- Startup pricing 18%
- 1 9.2/10First-rate
- $149 monthly
- 14-day free trial
- 8/12 feature checks
- Investor Q&A
- NDA e-signing
- Dynamic watermarks
- View-only and download control
- SOC 2 (hosting)
- 2 8.3/10Strong pick
- Quote only
- Free trial offered
- 9/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- GDPR
- 3 8.2/10Strong pick
- Quote only
- Free trial offered
- 8/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- 4 8.1/10Strong pick
- Quote only
- Free trial offered
- 7/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- 5 8.1/10Strong pick
- Quote only
- Demo, no trial
- 10/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- GDPR
- 6 8.0/10Strong pick
- $250 monthly
- Free trial offered
- 8/12 feature checks
- Investor Q&A
- NDA e-signing
- Dynamic watermarks
- View-only and download control
- SOC 2
- 7 7.7/10Good option
- Quote only
- Demo, no trial
- 8/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- GDPR
- 8 7.7/10Good option
- $299 monthly
- Free trial offered
- 7/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- 9 7.6/10Good option
- $55 monthly
- Free trial offered
- 9/12 feature checks
- NDA e-signing
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
- HIPAA
- 10 7.6/10Good option
- Quote only
- Demo, no trial
- 8/12 feature checks
- Investor Q&A
- Dynamic watermarks
- View-only and download control
- Viewer activity log
- SOC 2
- ISO 27001
Show places 11 to 17
- DealRoom 7.5
- SmartRoom 7.4
- ShareVault 7.0
- Onehub 7.0
- Digify 6.8
- Venue by DFIN 6.6
- DocSend 6.4
Folder index.
A starting structure for this room. Rename folders to fit your company and keep the numbers.
Certificate of incorporation and all amendments, bylaws, initial board and stockholder consents.
Delaware good standing certificate, foreign qualification certificates, franchise tax receipts.
Board and stockholder minutes and written consents in date order.
Stock purchase agreements, option plan and amendments, grant notices, 83(b) elections, SAFEs and notes.
Closing sets from prior rounds, investor rights, voting and ROFR agreements, side letters.
Customer, supplier, partner and licence agreements, with change of control and assignment clauses marked.
Patents, trademarks, domain registrations, invention assignment agreements, inbound licences.
Offer letters, confidentiality and invention assignment agreements, contractor agreements, policies.
Licences, permits, privacy notices and filings such as Form D.
Litigation, demand letters, threatened claims, settlement agreements.
D&O, general liability, cyber and E&O policies and certificates.
Need every file by stage? Use the startup data room checklist.
Must-have features.
| Provider | Investor Q&A | Viewer activity log | In-app redaction | Dynamic watermarks |
|---|---|---|---|---|
| Ellty | ||||
| iDeals | ||||
| Ansarada | ||||
| Firmex | ||||
| Datasite | ||||
| SecureDocs | ||||
| Drooms | ||||
| CapLinked | ||||
| Citrix ShareFile | ||||
| Intralinks |
- Investor Q&A
- Funds and buyers ask questions against a file; you assign, answer and publish replies, and the thread stays on record.
- Viewer activity log
- Shows which investor opened which file, for how long and when, and exports the record.
- In-app redaction
- Blacks out salaries, customer names or personal data inside the platform without keeping a second copy.
- Dynamic watermarks
- Stamps the viewer email and the time across every page, so a forwarded screenshot points back to its source.
Set up the room in 6 steps.
- 1
Rebuild the minute book
Collect every board and stockholder consent since formation and file them in date order. Missing approvals show up as gaps in the sequence.
- 2
Tie the cap table to paper
For each line on the cap table, link the signed purchase agreement or grant notice and the board approval behind it.
- 3
Flag contract clauses
List every agreement with change of control, assignment, exclusivity or most favoured customer terms. Counsel will ask for this list anyway.
- 4
Collect IP assignments
Confirm that every founder, employee and contractor who built the product signed an invention assignment. Get missing ones signed now, with counsel advising on any confirmatory assignments.
- 5
Redact where needed
Redact personal data and pricing in customer contracts if confidentiality terms require it, and keep the unredacted versions for a later stage.
- 6
Draft the disclosure schedule
Work with your lawyer on a first draft that lists every exception. It speeds up negotiation of the purchase agreement.
Common mistakes.
- Option grants made without board approval or with an expired 409A valuation.
- Founder stock issued without 83(b) elections on file.
- Customer contracts that need consent for assignment, found only after signing a purchase agreement.
- Lapsed Delaware good standing because a franchise tax filing was missed.