Dear SaaStr: What Does Typical VC Due Diligence Look Like for a Seed Round?
Some overheated seed deals go through very little VC diligence.
But in general, most VCs run a thorough diligence process, but tailored to the stage of the investment.
For a seed or early-stage round, the diligence is typically lighter and more focused on the team, market potential, and early traction. Here’s what you can expect:
1. Founder Diligence
They’ll want to understand your background, your motivations, and your ability to execute. Expect them to talk to your references—this could include former colleagues, early investors, or even customers if you have them. They’re looking for any red flags but also for signs that you’re a founder who can scale with the business.
They’ll also assess your leadership potential. Are you someone who can attract top talent and inspire a team? This is critical for them.
At SaaStr Fund, it’s super important to us the CTO is just as strong or even stronger than the CEO.
2. Market Validation
VCs dig into the market opportunity — although if they know it well already, you won’t be asked too many questions on it. In general, they’ll want to see that the TAM (Total Addressable Market) is big enough to support a venture-scale outcome. If you’re in B2B, they’ll likely look for signs that your product fits into a growing or underserved niche.
They’ll also evaluate your competitive positioning. How defensible is your product? What’s your moat? Or at least, what moat can you build over time?
3. Customer and Traction Checks
If you have customers, they’ll likely reach out to a few to understand how your product is being used and the value it’s delivering. They might even talk to churned customers to get a balanced view, though this is less common at the seed stage.
For very early-stage companies, where ARR is still small, they’ll focus more on momentum and early signals of product-market fit. Even at $10k-$20k MRR though, VCs will be looking for strong growth.
4. Technical Diligence
While technical diligence isn’t as heavy at the seed stage, they’ll want to ensure your product is scalable and built on solid foundations. If your CTO is super strong, that’s often enough. But if you’re in a fairly technical space, they may bring in an expert to assess your tech stack or roadmap.
5. Team and Culture Fit — And Ability to Recruit
They’ll want to see that you’re building a culture that can scale and that you have the ability to attract and retain top talent. This is especially important if you’re still in the early stages of building out your team.
6. Financial and Operational Review
At the seed stage, this is usually light. They’ll want to understand your burn rate, runway, and how you plan to use the funds. They’re looking for efficiency and a clear plan for the next 18-24 months.
Most Silicon Valley-style seed round diligence processes are thorough but not overly invasive, especially at the seed stage. They’re looking for alignment with their investment thesis and confidence in your ability to execute. If you’re transparent and prepared, the process should go smoothly.
