How to Do Due Diligence on a Startup in 2026

You've found a startup that looks promising. The pitch deck is polished, the TAM slide is enormous, and the founder speaks with conviction. But before you write a check — or even shake hands on a partnership — you need to do your homework.

Startup due diligence is the process of systematically verifying that a company is what it claims to be. It's not glamorous work, but it's the single most important step between "this looks interesting" and "here's my money."

Here's how to do it properly in 2026.

Why Startup Due Diligence Matters More Than Ever

The startup ecosystem in 2026 is bigger, faster, and noisier than ever. AI-generated pitch decks look flawless. Vanity metrics are easier to inflate. And with more capital flowing into earlier stages, the pressure to move fast can override the instinct to verify.

The result: investors and partners who skip due diligence get burned. According to CB Insights, 38% of startups fail because there's no market need — something basic research would have flagged.

Startup due diligence isn't about being paranoid. It's about being informed.

Step 1: Verify the Founders

Start with the people. Everything else depends on them.

Check:

• LinkedIn history — do the timelines match the resume?
• Prior ventures — what happened to them? (Crunchbase, press, court records)
• References — talk to former colleagues, not just the references they provide
• Social media presence — what do they post about? How do they handle criticism?
• Legal background — any lawsuits, bankruptcies, or regulatory issues?

Red flags: Gaps in employment with no explanation, inflated titles at previous companies, prior startups that disappeared without a trace.

Step 2: Understand the Market

The founder's TAM slide is marketing. Your job is to verify it.

Check:

• Is the market actually growing? (Look for third-party reports from Gartner, Statista, or industry analysts)
• Who are the existing players? Are they growing or shrinking?
• Talk to 5-10 potential customers. Would they actually pay for this?
• What regulatory changes could affect this market?

Don't trust the startup's market sizing. Build your own model, even a rough one.

Step 3: Examine the Product

You don't need to be a technical expert, but you need to understand what's real.

Check:

• Is there a working product, or just a prototype/mockup?
• Can you use it yourself? (If they won't give you access, that's a red flag)
• What's the tech stack? Is it defensible or easily replicable?
• Are there patents or proprietary data moats?
• If it's an AI product: what's the actual model architecture? Is it a thin wrapper on GPT, or something proprietary?

Step 4: Analyze the Financials

Even at early stages, the numbers tell a story.

Check:

• Revenue (real, not ARR projections) — verify with bank statements if possible
• Burn rate and runway — how many months until they need more money?
• Unit economics — does each customer actually generate profit?
• Cap table — who owns what? Any unusual terms or preferences?
• Previous funding rounds — terms, investors, and whether insiders are participating

Red flags: Revenue that doesn't match bank statements, unusually high customer concentration (one client = 80% of revenue), or a cap table that's already heavily diluted.

Step 5: Check the Legal Foundation

Boring but essential.

Check:

• Corporate structure — properly incorporated? In what jurisdiction?
• IP ownership — does the company (not the founder personally) own the IP?
• Employee agreements — do all employees have IP assignment clauses?
• Pending litigation — check PACER, state court records
• Regulatory compliance — especially for fintech, health tech, or data-heavy businesses

Step 6: Validate Customer Traction

Don't take the startup's word for it. Verify independently.

Check:

• Ask for customer references — then ask those customers hard questions
• Check app store reviews, G2, Trustpilot, or industry forums
• Look at web traffic trends (SimilarWeb, SEMrush)
• Check social media mentions — are real people talking about this product?
• If B2B: are the logos on their website actually paying customers, or just pilots?

Step 7: Assess the Competitive Landscape

Every startup says they have no competitors. They're wrong.

Check:

• Direct competitors — who else solves this exact problem?
• Indirect competitors — what are customers using today instead?
• Big tech risk — could Google/Microsoft/Amazon build this as a feature?
• Switching costs — how hard is it for customers to leave?

How AI Is Changing Startup Due Diligence

The due diligence process has traditionally been manual, slow, and expensive. A typical VC due diligence process takes 2-4 weeks and involves analysts, lawyers, and accountants.

In 2026, AI-powered tools are compressing this timeline dramatically. Services like IntelReport can generate comprehensive company intelligence reports in hours instead of weeks — covering financials, market positioning, competitive landscape, team backgrounds, and risk factors.

This doesn't replace human judgment, but it gives you a 50-page head start instead of a blank page. For angel investors and smaller funds without dedicated research teams, this levels the playing field.

The Due Diligence Mindset

The goal of startup due diligence isn't to find perfection — no startup is perfect. The goal is to understand what you're actually buying into: the real risks, the real opportunities, and the gaps between the pitch and reality.

The best investors aren't the ones who never make bad bets. They're the ones who go in with eyes open.

Start your due diligence faster: Get an automated intelligence report on any company →

Related reading:

• VC Due Diligence Checklist: 50 Questions Every Investor Should Ask
• Company Intelligence Reports: What They Are and Why You Need One