Risk

Twelve red flags that show up before the diligence call

Most deals that fail diligence show warning signs in the first read of the deck. None of these is disqualifying on its own; each is a question that needs an answer before the process goes further.

Published 4 August 2026 · 7 min read

Article

Market and demand

  • Market size given as a percentage of a large industry figure, with no derivation.
  • No named competitors, or a competitive slide where every rival scores badly on every axis.
  • Demand evidence consisting entirely of conversations the founder had.

Financial

  • A hockey-stick projection with no corresponding step change in the hiring or channel plan.
  • Blended CAC and lifetime value quoted without cohorts, hiding a deteriorating recent cohort.
  • Gross margin that improves dramatically at scale without a stated mechanism.
  • A raise amount that does not map to a specific milestone.

Team and governance

  • A cap table already crowded before an institutional round, or unvested founder equity left unexplained.
  • Key-person dependency where one founder holds all technical and all commercial knowledge.
  • Advisors listed prominently while full-time roles remain unfilled.

Product and data room

  • "Live" product with no demo environment, usage data, or deployment history.
  • Contradictions between the deck, the model and the documents — a customer count that differs by slide.

How to work through them

Convert each flag into a single question with a defined answer: which document, which figure, which date. Then keep the item open on the register until that evidence is attached. Flags that stay unresolved through a whole process are themselves the finding.

Record how each one was closed. A memo that shows a flag was raised and answered is far stronger than one where the flag never appears.

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