How to Use Ironclad to Respond to Due Diligence

Key takeaways:

• Implement a centralized contract management system before fundraising begins to avoid the costly scramble of responding to investor due diligence requests, as poor contract management costs companies nine percent of annual revenue and the inability to locate key contracts can derail deals.
• Utilize metadata filtering and keyword search capabilities in contract management platforms to instantly locate agreements matching specific criteria, transforming disclosure schedule creation from days of manual review into minutes of targeted queries.
• Establish automated quality assurance checks that prevent incomplete or defective agreements from entering your contract repository, ensuring every document you present to investors is properly executed and fully documented before due diligence begins.
• Recognize that organized contract management demonstrates company sophistication to investors, as your ability to quickly produce well-organized documents serves as a proxy for how well you manage other aspects of your business and builds transaction momentum.

Due diligence is the investigative process investors and their lawyers use to evaluate your company for potential risks before completing a transaction. This process typically involves reviewing contracts, financial records, and operational details to verify everything you’ve represented about your business.

For legal teams already stretched thin—59% of chief legal officers (CLOs) report rising workloads—venture financings create sudden spikes in workload. One of the largest tasks becomes responding to investor due diligence requests, where you’ll need to gather all of your contracts to determine what should be produced, what needs disclosure, and which contractual issues might affect the transaction.

The stakes are high here—World Commerce & Contracting research shows poor contract management costs companies nine percent of annual revenue, and the inability to find and disclose a key contract can sink a deal or result in litigation down the line. Having gone through this process during our own Series E financing, we learned firsthand how contract management tools can help legal teams respond to transaction diligence quickly and confidently—whether in a financing, acquisition, initial public offering (IPO), or other key deal. In fact, organizations using these platforms see an average 55% improvement across key performance areas, according to The 2025 Contracting Benchmark Report.

What is due diligence?

Most venture financings follow a similar due diligence format with two main components. First, general legal diligence involves responding to broad document requests from investors. Second, creating a disclosure schedule requires listing specific exceptions to the representations and warranties in your transaction agreement.

Preparing for both components in advance ensures a smooth, cost-effective process. You’ll move faster, present organized information, and make a strong impression on both investors and internal stakeholders.

Types of due diligence

Due diligence encompasses several specialized review areas that investors examine during transactions. Understanding these categories helps you prepare the right materials and respond efficiently to investor requests.

Legal due diligence examines contracts, corporate structure, litigation history, and regulatory compliance. This is typically the largest area of work for in-house legal teams during fundraising or acquisitions, which tracks with data showing that complex contracts like master services agreements (MSAs) require 90% legal involvement, according to the report.

Financial due diligence reviews your revenue, expenses, cash flow, and accounting practices. Investors verify that your financial representations are accurate and sustainable.

Operational due diligence investigates your business processes, technology infrastructure, and key personnel. This helps investors understand how your company actually operates day-to-day.

Commercial due diligence assesses your market position, customer relationships, and competitive landscape. Investors want to validate your growth assumptions and market opportunity.

Technical due diligence evaluates your product, intellectual property, and technology stack. For software companies, this often includes code reviews and security assessments.

Most transactions focus heavily on legal and financial due diligence. Your contract management practices directly impact how efficiently you can respond to both categories.

General legal diligence

General legal diligence is the process of responding to document requests from investors during a transaction. This phase focuses on providing contracts, agreements, and supporting materials that demonstrate how your business operates.

The process typically begins when you receive a due diligence request list (DDRL) from your lead investor or their counsel. These requests can range from broad categories to very specific asks—for example, you might see “a list of your top 10 customers and top 10 vendors and copies of agreements with each party.”

Your team then populates a virtual data room with responsive documents for investor review. The faster you can locate and produce these materials, the smoother your transaction proceeds.

Creating a disclosure schedule

Creating a disclosure schedule is the process of identifying and documenting exceptions to the representations and warranties in your transaction agreement. Think of it as listing everything that doesn’t perfectly match the standard statements you’re making about your business.

The process begins with your primary transaction agreement. In our Series E, this was the preferred stock purchase agreement containing representations and warranties—statements of fact your company must guarantee.

A representation might say “The Company’s assets are owned free and clear of all mortgages, liens, loans, and encumbrances.” Your team must determine whether any exceptions exist, such as a loan agreement. You then list each exception on the disclosure schedule.

Items disclosed on the schedule typically need to be populated into your virtual data room for investor review. This creates a complete picture of your contractual position.

Different transactions involve different diligence requirements. Most transactions, including acquisitions and IPOs, follow the same core principles—producing documents against request lists and documenting exceptions to representations.

How to streamline due diligence with contract management tools

When you’re dealing with hundreds or thousands of contracts across multiple years, manual review becomes a bottleneck that can derail deal timelines. Modern contract management platforms offer specific capabilities that transform this process from a weeks-long slog into something much more manageable. This efficiency explains why 28% of legal professionals identify contract review as their most impactful AI use case, according to The State of AI in Legal 2025 Report.

Filter contracts by metadata to respond faster

Contract filtering lets you instantly locate agreements matching specific criteria rather than manually reviewing hundreds of documents. This capability transforms disclosure schedule creation from days of work into minutes of queries.

Some representations require long lists of responsive contracts. The material agreements representation found in standard venture capital documents is a common example.

Here’s how this played out in practice during our Series E disclosure schedule preparation. We needed to list all contracts—both customer and vendor—with expected total contract value over $500,000. Because we had tagged contracts with a Total Contract Value metadata field at signature, we could filter our repository for Total Contract Value and “>$500,000” to instantly return responsive documents. What could have taken days of manual review took minutes.

The example below shows how this filtering might look using sample data:

You can cross-reference repository results with accounting software. This catches contracts where cumulative payments exceeded the original threshold, ensuring complete disclosure.

Search contract text when metadata isn’t enough

Keyword search capabilities let you find specific clauses and terms across all contracts when filtering by metadata won’t work. This provides a safety net for unusual diligence requests or edge cases your tagging system didn’t anticipate.

Sometimes you won’t have the exact tags needed to filter for specific contracts. Comprehensive keyword search functionality solves this by searching across your entire contract base or any subset.

During our Series E, we ran into exactly this situation when we needed to disclose non-standard intellectual property licenses. Only our partnership agreements typically contain these special licenses, so we filtered by Workflow Type: Partnership Agreement then keyword searched only within those contracts for “license.” This targeted approach was faster than searching everything.

The platform lets you flip through each highlighted mention of your search term. You can quickly assess which contracts need disclosure.

For uncommon terms like “lien,” search your entire contract base. This provides peace of mind that you haven’t missed any relevant agreements.

Ensure contract completeness before diligence begins

Quality assurance in contract management means establishing automated checks that prevent incomplete or defective agreements from entering your repository. This eliminates the embarrassing situation of sending investors contracts missing signatures, containing placeholders, or lacking key information.

Many transactional lawyers have experienced the terrible feeling of pulling up a contract only to discover it wasn’t fully signed. Perhaps it still contains placeholders for key information or has other material defects.

Diligence is when these defects surface—either when you discover them or, more embarrassingly, when your investors do. The problem compounds when dealing with historical contracts your team didn’t create.

Contract management platforms prevent these issues by using contract automation to enforce workflow requirements. You can require proper approvals, complete signatures, and correct metadata before a contract enters your repository.

This gives you confidence that repository searches return complete, properly executed agreements. Every contract you send investors will be complete and correctly documented.

Quality assurance becomes especially important for larger teams or teams with new members. When people work with unfamiliar historical contracts, automated checks catch problems before they reach investors.

Good contract management makes an impression

Beyond the operational benefits of faster document retrieval and more comprehensive disclosure schedules, well-organized contract management sends a powerful signal to investors. Being able to quickly and confidently pull well-organized documents from your records shows investors that your company is sophisticated and well-run.

Conversely, when companies struggle to identify and produce key contracts, investors are left to wonder what other problems may be lurking within your company. The quality of your diligence response often serves as a proxy for how well you run other aspects of your business.

Streamline your due diligence process

The difference between scrambling through diligence and managing it as a routine process often comes down to preparation and the right tools. When you have a centralized, searchable contract repository, you’re not just making your own life easier—you’re demonstrating to investors that your company is well-managed and organized.

This level of organization builds trust and keeps deal momentum going. When you can respond to requests quickly and confidently, you remove friction from what’s already a complex process. If you’re ready to turn your next diligence process from a chaotic scramble into a smooth operation, request a demo today to see how Ironclad can make your next transaction your smoothest one yet.

Frequently asked questions about due diligence

What does it mean to do your due diligence?

Think of it as doing your homework before making a big commitment. Whether you’re buying a company or investing in one, it’s the process of investigating the facts to confirm everything is as it seems. You’re checking all the details to make sure there are no hidden problems before you formally commit.

What does acting with due diligence mean?

This is about taking the reasonable steps a sensible person would take to satisfy a legal requirement or avoid harming someone else. In a business deal, it means you’ve made a good-faith effort to find and disclose any issues. It’s the standard of care that keeps transactions fair and transparent.

How long does the due diligence process typically take?

It really depends. For a straightforward venture financing where the company is well-organized, it could be two weeks. For a major acquisition of a global company, it could be several months. The biggest factors are the complexity of the business and how easily you can produce the requested documents. The more disorganized the company’s records, the longer the process will take.

What happens if due diligence uncovers problems?

It doesn’t always end the transaction. In fact, it’s pretty common to find something. Depending on what it is, it could lead to a few different outcomes: the buyer might renegotiate the price, ask for specific protections in the contract to cover the risk, or require the seller to fix the problem before the deal closes. The key is to find it, disclose it, and figure out a practical way to address it.

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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.