Written by Abhinav Gupta
As a young professional, I was involved with an EdTech startup that had failed its first due diligence with an investor. They had a second chance, and this time, a date was set. Over the next few days, the founder did some math since a second blow would mean the end of the company. This due diligence would be the last.
Our timeframe was set at ten days, the number of days remaining until the auditors would pay a visit.
Over the years, I have thought back to those ten days quite frequently. Out of all the things I have worked on in my professional life, it was probably the most mundane, and the pressure was the only thing that made it out of the usual.
What a failed due diligence really means
A failed due diligence hardly ever stems from a single number that is out of order. It is the lack of a system that can handle the pressure and deliver an answer. The investors sitting in front of you are trying to understand if you, the company, know itself. When faced with a question on something like the recognition of revenues, if you have three different people give you three different answers, no one cares about the number, as the confidence in the number is gone.
That was my guiding factor with those ten days. The first step would be to give the company the capacity to respond to inquiries, and let the responses work for themselves.
Self-diligence
The same methodology is what I used back then, and is the methodology I still use today. Before an investor gets the chance to access the data room, it is the duty of someone from the company to perform a self-review from the outside.
Sit in the chair of the person whose job is finding problems. Read your own filings, contracts, and reconciliations looking for the thing you would flag. Catalog the issues you found the way you would in a report, listing the issues without the soft speech described, listing them in the most uncomfortable way possible.
Sort the issues into those that can be tackled and those that will remain. For the latter group, document an explanation while you assume the context is still fresh for your audience.
This step is more important than most founders think. The majority of the diligence issues (and the most costly) that I have observed were issues that could be easily explained but simply were not.
What 10 days looked like
Most of us had never experienced a formal audit, so we had to rely largely on assumptions to determine how an audit team would approach this. This is what guided us in the triage process. Auditors have their own set of steps (we referred to them as “first principles”) that we had to lay out and then follow as we built our working papers.
The days ran long and the list made for uncomfortable reading. When the Big 4 team arrived, they found working papers ready, data in the format they use, and an explanation waiting for every issue they raised. The diligence process cleared for both the financial and the legal sides.
Disclosures and Unanticipated Findings
Investors can digest a known issue, but they draw the line at unanticipated findings. Depending on who uncovers it first, the same issue can be known and documented, or a frustrating surprise. The arrival of a known issue, along with a documented plan, is interpretive control. The same issue, discovered on day three by an auditor, is interpretive risk. It causes a negative audit of the remainder of the file.
Founders spend a lot of time and resources presenting a clean file. Despite how it feels, it helps present a complete file.
My Advice for a Founder
Conduct your own diligence at least twice a year, regardless of whether a funding round is coming up. This diligence is helpful on an ordinary weekday. Avoid presenting working papers against a deadline; working papers prepared under pressure are always of a lower quality. While open issues are documented, do so with the rationale, especially when the decision maker is present and can be consulted for their rationale.
What I Remember Most
The outcome made this founder happy, and I remember his relief that day. The most important lesson is derived elsewhere. The ability to do this in ten days means that this company can be successful, and answering in this way means the company earns the right to a second chance.
Author Bio:
“Numbers tell the truth. My job is to help businesses understand them.”
I founded ProfitJets with a simple belief: every company deserves a finance function that is fast, accurate, and founder-friendly, not something buried behind delays, complexity, or scattered processes.
My journey began inside the world of operational finance: deep in reconciliations, month-end closes, audits, and the daily grind of helping businesses stay compliant and investor-ready. What I learned early on is that finance isn’t just about bookkeeping or reporting. It is about clarity, and clarity is what empowers leaders to move with speed and confidence.
ProfitJets was built to bring that clarity to founders across the U.S. and Canada by providing them with dedicated accounting and bookkeeping teams that operate as an extension of their business. Over the years, we’ve supported companies from early-stage to multi-million-dollar ARR, streamlined finance operations across industries, and managed complex tax and compliance requirements with precision.
My strength lies in architecting finance systems that scale, whether it’s defining a Chart of Accounts that actually makes sense, building monthly reporting that investors rely on, ensuring airtight sales tax compliance, or giving founders real-time visibility so they never have to guess where their numbers stand.
At ProfitJets, our mission is simple:
“Build finance that helps businesses grow without losing control”.
I believe finance should reduce stress, not create it. It should bring order to chaos, surface insights that matter, and help leaders sleep better at night. That is what we deliver: clarity, speed, and a finance function that keeps you two steps ahead instead of two weeks behind.
“Clarity is a competitive advantage. When your numbers are right, your decisions become unstoppable.”