Your diligence gaps and your real dilution — before the term sheet.

Prepared for Northwind Robotics, Inc. (fictional company — sample) · Seed round · generated 2026-07-17.

Prepared by DiligenceKit — productized diligence-prep from an operator who took a deep-tech company public end to end and led $50M+ across financings. You don't have to take that on faith: the full scoring rubric and the exact dilution math are published on the methodology page, and a named contact stands behind every report at inha.journey@gmail.com. This document renders no professional opinion or individualized evaluation of your company and is not legal, investment, tax, or financial advice.

Northwind, here's where you actually stand.

You told us you're a seed-stage company with 8,500,000 fully-diluted shares, three SAFEs on the cap table (one carries an MFN clause), and a priced round in the works: $3,000,000 of new money at a $12,000,000 pre-money, with a 10% option pool the lead wants refreshed. You've answered the diligence kill-list and left seven items unchecked.

From those inputs alone, here is the picture — computed, not guessed:

Every figure on this page is reproduced, sourced and stress-tested in the pages that follow. Nothing here is an estimate off "typical" ranges — it is arithmetic on the exact cap table you entered.

Your inputs → your report. Nothing generic.

Every section here runs off something you typed on the intake form. This is the map. Wherever you see the “What you told us → what this section computed” box, that's the connection spelled out for that section.

The kill-list rubric and the exact dilution math are published in full on the methodology page and reproduced on p.50 — the engine is auditable, not a black box.

Your kill-list scorecard.

The questions an institutional lead, an acquirer's counsel, or an underwriter runs before wiring — scored mechanically against your round.

Category heatmap — where you're clean, where you bleed

"Clear" means every item that category expects at seed is checked — not that the category is irrelevant later. Categories that are clear now (Revenue, Key-Person) add more expected items at Series A and in an acquisition; see p.18–20.

Two of your gaps can freeze a wire. Read these first.

Not all gaps are equal. Most re-price you a little. Two — both left unchecked in your intake — are the kind that, discovered late, don't cost you a point of pre-money; they cost you the deal. Fix these before anything else.

The remaining five gaps (weight 2 and 1) re-price or slow a deal rather than kill it; they're worked in priority order starting p.11.

Why this matters to you now.

A gap doesn't cost you at the pitch. It costs you weeks in, during diligence, once the leverage has already left the room. Understand the mechanism and this stops being a checklist and starts being a negotiating tool.

The three ways an unfound gap hurts you

How the weighting works

Each kill-list item carries a weight from 1 to 3 that reflects how badly a missing answer re-prices or stalls a deal at your stage. Your score is the share of the weighted points you hold — so a single weight-3 gap moves your grade more than three weight-1 gaps. That's deliberate: it points your limited pre-round hours at the items that actually move money.

The full rubric — every item, its weight, and the round(s) it applies to — is on p.50 and the methodology page. Nothing is hidden; you can reproduce your own score.

Your gap work-order — ordered by deal impact.

Every unchecked item, ranked by how badly it re-prices or stalls a deal. Work top to bottom; each has a dedicated remediation page.

Pages 16–17 close the work-order with a consolidated proof-document map (every gap → the exact document that clears it) you can hand to your team as-is.

Collect and summarize your convertible stack.

Every SAFE, note and side letter, with its cap, discount, MFN and pro-rata terms, on one page.

Do this

1. Pull every signed SAFE, convertible note and side letter — including any you signed informally. Missing one is worse than having a bad one.
2. Build the one-page grid (template on p.44). For each: amount, type, cap, discount, MFN, pro-rata, date.
3. Flag the MFN instrument in red — note which other SAFE's terms it inherits. Your dilution model (p.22–24) already resolves this: the MFN angel inherits the $6M cap.
4. Have counsel confirm no side letter grants a term not reflected on the grid (extra pro-rata, information rights, board observer seats).

Confirm no prior-employer claims your IP.

No founder built the product on a prior employer's time or tools, and none is bound by a non-compete or invention-assignment that could claim it.

Do this

1. Ask each founder for a copy of their most recent prior-employer employment agreement and any IP/invention-assignment or non-compete they signed.
2. Have counsel read them specifically for: present-tense assignment of inventions, "conceived during employment" language, and state-law enforceability of any non-compete.
3. Document a clean founder rep (template on p.45). If there's a real overlap, resolve it now — a release or assignment from the prior employer — while you still have time and no counterparty watching.

Paper every option grant properly.

Every option grant has a board approval, a 409A-supported strike, and a signed grant agreement — none are "promised but not papered."

Do this

1. Reconcile your options ledger to the board consents that approved each grant. Every option should trace to an approval.
2. Identify any "we promised X options" that were never boarded or papered. Board them now or remove them from headcount expectations.
3. Confirm your 409A is current (within 12 months or the last material event) and that every strike is at or above it.

This gap and the pool-math gap (p.12) both touch the fully-diluted denominator — clearing them together makes your cap table defensible and your dilution number final.

Be able to reproduce the pool-shuffle math.

You can show the post-round ownership math including the option-pool refresh and where its dilution actually lands (pre-money, on you).

Do this

1. Take the pro-forma on p.25 to your term-sheet conversation. Ask whether the pool can be sized to actual near-term hiring rather than a round-number 10%.
2. Model the pool at 8% and 12% (your report's scenario pages p.27–29 do this) so you know the ownership cost of each point before you concede it.

Disclose (or clear) any litigation exposure.

There is no pending or threatened litigation, and no unresolved demand letters, that you have not disclosed.

Do this

1. List every dispute, threatened claim, and demand letter — customer, employee, vendor, IP — regardless of merit. A meritless-but-disclosed claim is a footnote; a meritless-but-hidden one is a trust event.
2. For each, note status and your reserve/position. If there's genuinely nothing, prepare the clean rep language (p.45).
3. Where a demand letter is outstanding, resolve or paper it before the data room opens.

Move IP into the company's name.

Trademarks, patents and domains are inventoried and owned by the company — not by a founder personally.

Do this

1. Inventory domains (check the registrar account owner), trademarks (TESS/registrar), and any patents or applications.
2. Transfer anything registered to a founder personally into the company. Domains especially are often bought on a personal card and never moved.
3. Record the assignments and update your IP schedule (template p.44).

Weight-1 items don't move your grade much on their own, but clearing all of them together is what takes you from a defensible-with-caveats data room to a clean one (see p.31).

Document money moving to/from founders.

Any money moving between the company and its founders (loans, expense reimbursements, deferred salary) is on the books and repayable on clear terms.

Do this

1. List every dollar that has moved between a founder and the company outside of payroll — startup costs fronted personally, deferred salary, informal loans.
2. Paper each with a short note (template p.46) and reconcile it to the ledger.
3. Where practical, settle small balances before the round so there's nothing to explain.

Each gap → the exact document that clears it.

Hand this to your team as-is. When every "Proof" cell has a linked document in your data room, the gap is closed.

What you already have right.

Diligence prep is not only about gaps. Eight of your fifteen expected items are already clean — worth naming, because these are the ones a lead will quietly check and move past. They're your credibility base.

Category deep-dive: Cap Table & IP.

Cap Table & Instruments — 3 of 5 open

The category leads run first, because every ownership number downstream depends on it. Your three open items (SAFE stack, option grants, pool math) all touch the fully-diluted denominator. Clearing them makes both your cap table and your dilution model final.

IP & Product Ownership — 2 of 3 open

You've done the hardest part (present-tense IP assignment from all contributors). The two open items are the external prior-employer risk (weight 3, p.10) and personal-vs-company ownership of registered IP (weight 1, p.14).

Category deep-dive: your clean categories.

Corporate Hygiene, Revenue & Financial Integrity, and Key-Person are all clear at seed. Here's what a lead confirms in each — so you know what they're looking at even when there's no gap.

Corporate Hygiene — clear (2/2)

Confirms the entity being invested in exists cleanly. A lead skims your incorporation set and consent history; because both are complete, this is a five-minute check that builds confidence rather than a stall.

Revenue & Financial Integrity — clear (2/2 at seed)

Your recognition basis is consistent and your monthly financials reconcile to the bank. At seed this is enough. Note: at Series A and in an acquisition this category adds items — metrics-from-system, tax-nexus, liability schedules — so treat "clear at seed" as a floor, not a finish line (p.20).

Key-Person & Team — clear (1/1 at seed)

Founder shares vest, so a departing co-founder can't walk with unearned equity — the item investors require before wiring. At later stages this category adds key-person-risk and worker-classification checks.

What changes at Series A and in an acquisition.

Your report scores you at Seed — but the same rubric expands as you raise. Here's what gets added, so a category that's "clear" today doesn't surprise you later.

The takeaway: the seven items you clear now are also seven you won't re-fight at Series A. Prep compounds.

Your dilution model — the number you negotiate against.

Computed from your own cap table: post-money SAFE conversion, cap-vs-discount selection, MFN inheritance, the pre-money option-pool shuffle, and pro-rata. Arithmetic only — not a valuation.

Your inputs: 8,500,000 existing fully-diluted shares · 3 convertible instruments · a $3,000,000 priced round at a $12,000,000 pre-money · a 10% post-round option pool.

Every SAFE, converted — and why on that term.

Each SAFE takes the lowest of its cap price, discount price, and the round price (the most shares). This table shows what each of your three instruments actually gets.

Round price for the new preferred: $1.0691. Note every SAFE converts below it — that's the point of a SAFE. The Seed Angel and the MFN angel convert at the same $0.5346 because the MFN clause pulled the $6M cap across (see p.24).

Cap vs discount, worked for your SAFEs.

Why does one of your SAFEs convert on its cap and another on its discount? Because each holder takes whichever gives them more shares. Here it is, holder by holder.

Seed Angel Collective — converts on the $6M cap

A $400k post-money SAFE with a $6M cap fixes ownership at investment ÷ cap = 400k ÷ 6M = 6.67% of the pre-new-money company. The round then dilutes that to 5.33% of the post-round total. The cap price ($0.5346) beats the round price ($1.0691) handily — the cap wins.

Pre-seed fund — converts on the 20% discount

This SAFE has a high $20M cap and a 20% discount. Its cap would only give 250k ÷ 20M = 1.25% — worse than the discount. The discount price is 80% of the round price = $1.0691 × 0.8 = $0.8553, giving 292,297 shares (2.08%). The holder takes the discount because it's the lower price.

Your MFN clause, priced.

You flagged one SAFE as MFN (Most-Favored-Nation) with no cap or discount of its own. This is the term most first-time founders don't fully model — so here is exactly what it does to your cap table.

What MFN does

An MFN clause lets a bare SAFE inherit the best terms granted to any other SAFE before the priced round. Your Strategic angel's $150k SAFE had no cap and no discount on its own — but the MFN pulls in the best cap on offer: the Seed Angel's $6M cap.

The option-pool shuffle, priced.

The quietest few points you'll give up all round. Your lead wants a 10% option pool, refreshed pre-money. Here's where its dilution actually lands.

A pool created pre-money is carved out of the company before the new investor's shares are counted — so it comes entirely out of existing holders (founders + SAFEs), not the new money. The new investor gets their 20% on top of a company that's already made room for the pool.

The ownership waterfall & your pro-rata.

Where every share of the post-round company sits — and what it costs your pro-rata holders to hold their stake through the next round.

Post-round ownership waterfall

Pro-rata — cost to hold through a same-sized next round

You flagged the Strategic angel as holding a pro-rata right. To hold their 2.00% converted stake through a same-sized ($3M) next round, they'd invest:

Scenario A: what each point of pool costs you.

The pool is negotiable. Here's your exact ownership at 0%, 8%, 10% and 12% — same round, same SAFEs, only the pool moves. This is the table you argue from.

Scenario B: what a higher (or lower) pre-money does.

The number you're really negotiating. Same $3M raise, same SAFEs, same 10% pool — only the pre-money moves. Note how the SAFEs' take shifts too, because their conversion depends on the round price.

A $16M pre-money vs. $12M lifts your post-round position from 60.58% to 64.85% — over 4 points of the company. It also shrinks the new investor's take (they pay more per share for the same $3M) and slightly shifts each SAFE's percentage, because a higher round price changes which SAFEs are cap-bound vs. discount-bound.

Scenario C: raising more.

What if you took a bigger round at a proportionally higher valuation? Here's $5M at $20M pre (holding the 20% new-investor share) against your $3M-at-$12M base.

Same 20% to the new investor either way — but at the larger, higher-priced round your fixed-dollar SAFEs and pool take a slightly smaller share of a bigger company, so your founder position ticks up to 61.42%. The lesson isn't "always raise more"; it's that your dilution depends on the interaction of all four levers (raise, pre-money, pool, SAFE stack), and only a model that solves them together gives you the real number.

What moves your number most.

Pulling the scenarios together: which lever should you spend your negotiating capital on? Ranked by how many points of ownership each move is worth to you.

These are your levers on your cap table. They are not advice to take any particular term — they show the arithmetic consequences of each so you and your counsel can decide.

The two data rooms.

Here's the picture worth holding in your head: the same company, the same round, two versions of the diligence — the one you'd open today, and the one you open after this report's work-order is done.

The next pages lay out exactly how to get from the left column to the right — a dated roadmap, the folder structure, and the rewritten investor conversation.

Your readiness roadmap.

From C·60 to A+·100 in the 2–6 weeks you have before the room opens. Sequenced so the deal-killers close first and nothing waits on something that isn't started.

Milestones, with the score at each.

Your grade isn't a single event — it moves as you clear items. Here's the trajectory, so you can watch it climb and know exactly what each milestone is worth.

Notice the jump: closing just the two weight-3 killers takes you from C to A (60 → 85), because they carry the most deal-impact weight. The remaining five items are worth 15 more points combined — real, but you get most of the readiness lift from the first two days of work.

Who owns what, and when.

A roadmap only ships if someone owns each line. Here's the work split across you, your counsel, and your finance/bookkeeping — most of it is yours, and most of that is collection, not creation.

Effort figures are rough planning estimates for a company at your stage, not a quote. Your counsel sets their own scope and rate.

The data-room folder tree.

A lead's associate should be able to find any proof in under a minute. Here's the folder structure that maps one-to-one to the kill-list categories — build it now, drop documents in as you clear each gap.

Colored lines are your open gaps, mapped to exactly where their proof lives. When every colored line has a document, your room is complete.

Five rules that make a room read as "clean."

1. One source of truth per fact. The cap table in folder 02 is the cap table. If a number appears in two places, they must match to the share — mismatches are the fastest way to lose trust.
2. Name files so a stranger can navigate. "2024-03_SAFE_SeedAngel_400k_6Mcap.pdf" beats "safe (final) v3.pdf." The associate skimming at 11pm will thank you.
3. Put the summary on top. Every folder gets a one-page index. Your SAFE terms grid, your cap table, your litigation schedule — the summaries are what get read; the underlying docs are what get spot-checked.
4. Disclose proactively. A known issue with a note ("this contractor was promised equity; here's the resolution") is a footnote. The same issue found by the other side is a trust event. Put your worst news in a labeled folder.
5. Version-lock before you open it. Freeze the room when diligence starts; track any additions in a dated log. A room that changes under the reader's feet reads as disorganized.

The next investor conversation, rewritten.

Same lead, same round — but you've done the work. Here's how three moments change.

What clearing each gap is worth.

Not in vague terms — in the concrete thing each closed gap protects. This is the case for spending the next two weeks on paperwork.

The economics, stated plainly.

We won't insult you with a fake ROI multiple. Here's the honest version.

The report doesn't replace your counsel — it makes their hours cheaper by handing them a clean set instead of a discovery project. And it puts the dilution number in your hands before the term-sheet conversation, which is the one thing neither a free checklist nor a $10k engagement timed for later gives you at this exact moment.

Your readiness projection.

Where you land if you run the work-order. This is the destination the roadmap points at.

This week (days 1–7).

The deal-killers and re-pricers. Print this page; check the boxes.

Next 30 days.

The cleanups and the room. This is what takes you from "no killers" to "genuinely clean."

90 days & beyond.

Once this round closes, prep compounds. A little maintenance now saves the Series A scramble later.

Template: SAFE terms grid & IP schedule.

One-page SAFE / convertible terms grid

This grid is pre-filled from your intake. Add the signature dates, confirm with counsel, and it's your data-room folder 02 summary.

IP schedule (owner of record)

Any row that reads a founder's name is a Gap-6 transfer to make before the room opens.

Template: founder reps & litigation rep.

Founder prior-employer / IP representation (draft — for counsel to finalize)

Every founder signs one. Where a real overlap exists, do not paper over it — get counsel to resolve it (a release/assignment from the prior employer) before the room opens.

Litigation representation (draft — clean case)

If Schedule X isn't empty, list each item with status and reserve. A disclosed claim is a footnote; a hidden one is a deal event.

Scripts for the two hardest conversations.

Founder loan / reimbursement note (short form)

Negotiating the pool (script)

Sending the cap table (script)

Bring this to your advisor, counsel & CPA.

A one-page handoff so the people you pay by the hour start from your clean set, not a discovery project. Tear this out.

The questions you're about to be asked — answered.

Diligence is a conversation. Here are the four questions a seed lead most reliably asks, with the answer your report already gives you.

Your next step.

You have the map. If you want a human to walk it with you — against your real term-sheet drafts — that's the natural next tier.

A QoE or diligence-readiness engagement from an advisory firm runs $10,000+; a fractional CFO's fundraise-window retainer is $5,000–$15,000/month. The workshop is the flat-fee, one-session version of that work.

How the numbers were computed.

Nothing in this report is a black box. The full rubric and math are public on the methodology page; here's the summary.

The dilution model

Post-money SAFEs fix ownership = investment ÷ cap on the pre-new-money capitalization (option pool included, per the standard YC post-money SAFE definition). Each SAFE converts at the lowest of its cap price, discount price, and the round price (the most shares). MFN fills a bare SAFE with the best cap/discount granted to any other SAFE. The option pool is carved pre-money, so its dilution lands on existing holders. The round price and the pre-new-money base are mutually dependent, so the model solves by fixed point. It is deterministic and unit-tested against hand-derived scenarios — arithmetic, not a valuation.

The kill-list score

A round-weighted rubric of general capital-markets diligence practice (the same categories appear in YC, NVCA model, and Cooley GO public resources), authored fresh in plain English. Each item carries a weight (1–3) reflecting deal impact and the round(s) it applies to. Your score is the share of the weighted points expected at your round that you hold. No employer-confidential material is used or shipped.

Public sources cited (not copied)

Y Combinator post-money SAFE user guide (public); NVCA model legal documents (public); Cooley GO founder resources (public). These informed the categories; every line of the rubric and every line of the math is original to DiligenceKit.

Questions? inha.journey@gmail.com — a human replies within one business day. · Prepared by DiligenceKit.