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The DD framework

AngelHub structures due diligence across 8 work packages. Each work package covers a distinct dimension of the business. Together they give a complete picture of the investment opportunity.

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The coverage map

The coverage map is the 11-topic DD grid visible on the project dashboard. It shows at a glance which areas have been addressed (green), partially addressed (amber), or not yet covered (red). Update the coverage map as you work through each area. It is your running record of DD progress and the tool you’ll use to brief the group on where you are.

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Running the process — week by week

Weeks 1–2 — Initial review and valuation
  • Read all documents in the data room thoroughly
  • Run the financial model stress tests (see Using AngelAI)
  • Form an initial view on valuation — does the company’s ask reflect its current position?
  • Identify the key questions for each work package
  • Contact the entrepreneur with your initial information requests
Weeks 2–4 — Deep DD
  • Work through each of the 8 work packages systematically
  • Assign specific work packages to angels with relevant expertise
  • Conduct reference checks on the founders (Team section)
  • Verify IP ownership and any licence agreements (IP and technology section)
  • Review contracts, cap table, and legal structure (Legal and operations section)
  • Use AngelAI throughout to surface relevant frameworks, questions, and red flags
Weeks 4–5 — Heads of terms
  • If the DD findings support proceeding, prepare heads of terms
  • Negotiate valuation and key commercial terms with the entrepreneur
  • Share with the group for input before finalising
Weeks 5–7 — Legal documents
  • Engage a solicitor to prepare the investment agreement and shareholders agreement
  • Review the disclosure letter carefully
  • Ensure EIS/SEIS eligibility is confirmed (advance assurance should be in place)
Weeks 7–8 — Completion
  • Final checks before funds are transferred
  • Confirm all conditions precedent are satisfied
  • Coordinate completion — funds are released only when all documents are signed

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Managing the issues list

As DD progresses, maintain a running issues list — a record of open questions, unresolved concerns, and items waiting for information from the entrepreneur. Review it at the start of each week. An item leaves the issues list when it is either resolved (you have the answer you need) or accepted (the group has decided it is not a deal-breaker). Never close an issue by ignoring it.

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Communicating with the group

Keep the angel group informed throughout DD. At minimum:
  • A brief update at the end of weeks 2 and 4 — what has been found, what is still open
  • A clear recommendation at the end of DD — invest, defer, or decline, with reasons
Use AngelHub’s note-sharing feature to share your DD notes with the group as you go. This means the group recommendation meeting is a confirmation of a shared view, not a surprise presentation.

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Red flags

If you encounter a significant red flag during DD — something that could be a deal-breaker — surface it to the group immediately rather than waiting for the end of the process. Common deal-breakers include: undisclosed litigation, IP ownership disputes, a cap table with significant unexplained complexity, or financial projections that cannot be reconciled with the underlying data. See the AngelHub red flags reference guide for the most common issues and how to assess them.