Due Diligence
Definition
The process by which an investor or acquirer investigates and verifies the material facts about a company before completing an investment or acquisition. Financial due diligence is the subset of this process that covers the company's financial position, performance, projections, and financial management practices. For early-stage companies, the depth and scope of due diligence increases with the investment amount and the stage of the company.
Common Misapplication
The most common misapplication is preparing for due diligence as if it begins when a term sheet is signed. The investor's financial assessment begins at first contact. Materials shared in initial conversations are part of the due diligence record and must be consistent with materials shared in the formal process.
FFI Standard Reference
This term is defined and applied in Book 5, Section 5.4: The Financial Due Diligence Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Due Diligence. https://ffistandard.org/glossary/due-diligence/. 2026.