What is a Due Diligence Questionnaire (DDQ)? Everything Founders & Investors Should Know

What is Due Diligence?

Due diligence is the investigative process investors, acquirers, or stakeholders follow to evaluate a company’s financials, legal standing, operations, and other critical aspects before making decisions like investments, mergers, or acquisitions.

In simpler terms, it’s the homework done before saying “yes” to a business deal. For startups, due diligence often kicks in during fundraising rounds when investors want to validate everything from your cap table to your product-market fit.

What is a Due Diligence Questionnaire (DDQ)?

A Due Diligence Questionnaire (DDQ) is a structured document used to gather essential information about a company. It contains standardized questions covering legal, financial, operational, and compliance topics.

Think of it as a pre-flight checklist, if you’re a founder, this document helps prove that your company is investment-ready. If you're an investor, it ensures you’re not flying blind.

Where is a DDQ Used?

• Fundraising Rounds (Pre-Seed to Series C+)

• Mergers and Acquisitions (M&A)

• Joint Ventures

• Private Equity & VC Evaluations

• Vendor Risk Assessments

Who Uses a DDQ?

• Startup Founders preparing for investment

• Venture Capitalists and Angel Investors

• Private Equity Firms

• Legal and Compliance Teams

• Corporate Development Teams

• LPs evaluating fund managers

What Does a DDQ Typically Include?

Here's a breakdown of common DDQ sections:

1. Corporate Information

• Company legal name, registration details, corporate structure

• Cap table and shareholder breakdown

2. Financial Information

• Past and projected P&L statements

• Balance sheets

• Cash flow analysis

• Revenue breakdown (by product, region, or customer)

3. Legal & Compliance

• IP ownership and patents

• Pending or past litigations

• Contracts and liabilities

• Licenses and regulatory documents

4. Product & Technology

• Tech stack overview

• Security and data protection practices

• Product roadmap

• Infrastructure and hosting providers

5. Team & HR

• Org chart

• Key team bios and responsibilities

• Employment agreements

• Stock option plans and ESOP documentation

6. Customer & Market

• Customer list (or anonymized)

• Key metrics: CAC, LTV, churn

• Competitive landscape

7. Operations

• Key business processes

• Vendors and partners

• KPI dashboards

Benefits of Using a DDQ

• For Founders: Speeds up the fundraising process by building investor confidence.

• For Investors: Helps identify risks, red flags, and compliance gaps.

• For Teams: Creates internal clarity on documentation and structure.

DDQ Alternatives or Complements

• Data Rooms: A secure space to host DDQs and related documents. (Use Plox for secure, trackable virtual data rooms.)

• Investor Briefs: Short summaries used in early conversations.

• Pitch Decks: High-level overview but not a substitute for a DDQ.

Best Practices for Founders

1. Start Early: Don't wait for investors to ask.

2. Use a Template: Saves time and ensures nothing is missed.

3. Update Regularly: Keep it aligned with your business updates.

4. Host it in a Data Room: Use platforms like Plox for access control, viewer tracking, and security.

Want to impress investors during due diligence?
Set up your DDQ inside a secure Plox data room.