A founder I advised received a term sheet from a prominent Austrian VC. EUR 500,000 at reasonable terms. She was elated. Then the due diligence process started, and it nearly killed the deal.
Her financial records were scattered across three spreadsheets and a shoebox of receipts. Her employment contracts lacked IP assignment clauses. Her cap table had a verbal agreement with a former advisor that was never formalized. The investor’s legal team found issues she did not know existed.
The deal closed — eventually. Three months later than it should have, at a lower valuation because the messiness signaled risk, and after EUR 8,000 in emergency legal fees to clean up the problems.
Due diligence is not the obstacle between you and funding. Your lack of preparation is. Every issue an investor finds during due diligence is an issue you should have solved before the process began.
What Due Diligence Is
Due diligence is the investigation an investor conducts before finalizing an investment. It verifies that what you represented in your pitch and financial projections matches reality, and that there are no hidden risks.
Austrian investors — especially institutional ones like VCs — conduct thorough due diligence. More thorough, in my experience, than many US investors at equivalent stages. The Austrian market is small, reputations are permanent, and investors cannot afford to back companies with undisclosed problems.
Due diligence typically covers five areas: financial, legal, commercial, technical, and team. Here is what you need ready for each.
Financial Due Diligence
Investors want to see clean, accurate, and verifiable financial records. Not perfect — early-stage companies have messy finances. But organized and honest.
What they will request:
Financial statements for all operating years. If you are an Einzelunternehmen, this means your Einnahmen-Ausgaben-Rechnung (income and expense statement). If you are a GmbH, this means your Jahresabschluss (annual financial statements) as filed with the Firmenbuch.
Monthly revenue data. Revenue by month for the past 12-24 months. Broken down by customer, product, or segment if applicable. They are looking for growth trends, seasonality, and concentration risk (dependence on one or two large customers).
Cash flow projections. A 12-18 month cash flow forecast. How does the investment capital flow through the business? When do you reach profitability or the next funding milestone? These should match the financial projections in your pitch deck.
Tax filings. Your Einkommensteuerbescheid or Korperschaftsteuerbescheid for all operating years. Investors want to verify that your reported revenue matches your tax filings. Discrepancies are a red flag.
Bank statements. The past 6-12 months. Not because they do not trust you — because they need to verify cash flows against reported figures.
Outstanding liabilities. All debts, loans, credit lines, unpaid invoices, tax obligations, and SVS contributions. Undisclosed liabilities are the most common deal-killer in Austrian due diligence.
Preparation checklist:
- Hire a Steuerberater if you do not have one. Get your books in order.
- Reconcile all bank accounts with your accounting records.
- List every outstanding liability, no matter how small.
- Prepare monthly P&L statements for at least the past twelve months.
- Ensure tax filings are current — no unfiled returns, no outstanding assessments.
Legal Due Diligence
Austrian legal due diligence is particularly thorough because Austrian corporate law is prescriptive and investors want to ensure compliance.
What they will request:
Company registration documents. Gesellschaftsvertrag (articles of association) for a GmbH. Gewerbeanmeldung for any business. Current Firmenbuchauszug (commercial register extract) showing the current status, management, and shareholders.
Shareholder agreements. Any agreements between shareholders beyond the Gesellschaftsvertrag. Side agreements, voting agreements, preferential rights, drag-along/tag-along provisions. If you have verbal agreements with co-founders or early investors that were never formalized — formalize them now.
Employment contracts. Every employment contract, including those of founders who are also employees of the GmbH. Austrian employment law is specific — contracts must include certain mandatory provisions. Investors check for compliance.
IP assignment clauses. Do your employment and contractor agreements include clauses assigning all work-related intellectual property to the company? If not, there is a risk that former employees or contractors own part of your codebase. This is the single most common legal issue I see in Austrian startup due diligence.
Contractor agreements. Every agreement with independent contractors, freelancers, and agencies. Austrian labor law has strict rules about when a contractor relationship is genuinely independent versus a disguised employment relationship (Scheinselbstandigkeit). Misclassification exposes the company to back payments of social insurance and employment taxes.
Customer contracts. Your standard terms of service, key customer contracts, and any contracts with unusual terms (exclusivity, guaranteed volumes, penalty clauses).
Regulatory compliance. Proof of compliance with relevant regulations — GDPR data processing records, industry-specific licenses, environmental permits if applicable.
Preparation checklist:
- Compile every legal document related to the company in a digital data room.
- Review employment contracts for IP assignment clauses. Add them if missing.
- Formalize any verbal agreements with shareholders, advisors, or partners.
- Ensure your Gewerbeanmeldung covers your actual business activities (not just the original registration).
- Review contractor relationships for Scheinselbstandigkeit risk.
Commercial Due Diligence
This is where the investor validates your market claims and customer traction.
What they will request:
Customer list and metrics. Number of customers, revenue per customer, churn rate, customer acquisition cost, lifetime value. For SaaS businesses: MRR (monthly recurring revenue), ARR (annual recurring revenue), net revenue retention.
Customer references. The investor will want to speak directly to two to five of your customers. Choose customers who are articulate, positive, and represent your ideal customer profile. Prepare them — let them know an investor may call, and brief them on what to expect.
Market analysis. Your assessment of market size, competitive position, and growth trajectory. Grounded in data, not optimism. Use WKO statistics, industry reports, and your own customer data.
Competitive landscape. Who are your competitors? How do you differentiate? What are your defensible advantages — technology, brand, network effects, data, relationships?
Sales pipeline. Current pipeline with probability-weighted forecast. Demonstrate that revenue growth is sustainable, not dependent on one large deal.
Preparation checklist:
- Build a CRM-quality customer database (even a spreadsheet is fine if it is complete and accurate).
- Calculate your unit economics: CAC, LTV, payback period.
- Prepare a list of five referenceable customers and inform them.
- Document your competitive advantages with evidence, not assertions.
Technical Due Diligence
For technology companies, investors assess the quality and defensibility of your technology.
What they will assess:
Codebase quality. An investor’s technical advisor or CTO may review your code. They are looking for: architecture decisions, technical debt, test coverage, documentation, and scalability. The code does not need to be perfect. It needs to be maintainable and built on sound foundations.
Technology stack. What you built with and why. Investors assess whether the stack is appropriate for the product, whether it scales, and whether the talent market supports it (can you hire developers who know this stack in Austria or the DACH region?).
Infrastructure. Where your product runs, how it scales, and what your uptime and performance look like. Basic monitoring, backup procedures, and disaster recovery plans demonstrate operational maturity.
IP ownership. Technical due diligence overlaps with legal due diligence here. Does the company own all the code? Are there open-source dependencies with restrictive licenses? Are there third-party components with licensing implications?
Preparation checklist:
- Clean up the codebase — not a rewrite, but remove obviously dead code, update documentation, ensure the README is current.
- Document your architecture decisions and technical roadmap.
- Verify that all third-party licenses are compatible with your business model.
- Ensure your code is in a version control system (Git) with a clear history.
Team Due Diligence
Austrian investors invest in teams at least as much as in businesses. Team due diligence is about verifying that the people match the claims.
What they will assess:
Founder backgrounds. Your CV, your track record, your references. Austrian investors will call your former employers and business contacts. Discrepancies between your pitch and your verifiable history are fatal.
Team composition. Do you have the skills needed to execute the plan? If your plan requires technical capability and nobody on the team is technical, that is a gap the investor will flag.
Founder alignment. Do the co-founders agree on direction, equity splits, and roles? Are there unresolved tensions? Investors have seen enough co-founder breakups to probe this carefully.
Vesting schedules. Are founder shares subject to vesting? Investors strongly prefer vesting because it protects the company if a co-founder leaves early. If you do not have vesting, expect the investor to require it as a condition of the deal.
Preparation checklist:
- Ensure your LinkedIn and CV accurately reflect your experience.
- Resolve any co-founder issues before the fundraise, not during.
- Implement vesting schedules if you have not already.
- Have a clear organizational plan for how the team grows post-investment.
The Data Room
Create a digital data room before you start fundraising. A data room is a secure, organized repository of every document an investor will need during due diligence. Use a tool like Google Drive, Notion, or a dedicated data room platform (Digify, DocSend).
Structure:
- Financial: statements, tax returns, bank statements, projections
- Legal: registration documents, contracts, IP documentation
- Commercial: customer data, market analysis, pipeline
- Technical: architecture documentation, IP ownership evidence
- Team: CVs, org chart, vesting agreements
Having the data room ready before a term sheet arrives signals professionalism and speeds the process. A founder who can share a complete data room within 24 hours of a term sheet makes a dramatically different impression than one who needs three weeks to compile documents.
The Timeline
Austrian due diligence for seed and early-stage deals typically takes 4-8 weeks. For Series A, 6-12 weeks. The timeline extends when the founder is not prepared — every missing document, every unresolved issue, every data request that takes a week to fulfill adds delay.
Delay is the enemy of deals. Investor enthusiasm peaks at the term sheet. Every week of due diligence erodes that enthusiasm slightly. A fast, clean due diligence process preserves the momentum. A slow, messy one gives the investor time to question the deal.
Prepare before you fundraise. Build the data room in month one of your fundraising timeline. Resolve legal issues before you pitch. Clean your books before you share them. The funding process rewards preparation.
The founder whose deal nearly died over a shoebox of receipts learned an expensive lesson. You do not have to. Prepare your due diligence materials now — whether you plan to raise in three months or three years. Clean operations are good business practice regardless of investors. And when the term sheet arrives, you will be ready.
