Commercial Due Diligence

Max Bonpain
2 min readJun 4, 2020

Startup founders have a tendency to pick the best numbers, so investors have a tendency to check them…!

Congratulations, you just got your first seed round covered… or do you? Getting the first “yes” is an amazing feeling, but it’s still a long way until the money is in the bank. And in that way stands the due diligence, especially technical, financial and commercial due diligence.

Commercial due diligence covers 3 main points:

  • your TAM (total addressable market) and assumptions behind the TAM. This is about how big you can be and how fast you can get there. Investors love to dream, and they don’t want to waste time (and money) on the small fry — they’re all looking for a 10X return, or even the occasional unicorn, to compensate for all the failed investments. So, yes, they want you to have a big TAM, but a real one, not some fancy number. Same for your potential market share. Oh, and they want the detailed assumptions behind those forecasts: how many customers acquired, retained, how much average revenue per customer, how often, etc… Most investors have mandates, or at least preferences, so they’d already have a benchmark in mind to judge how realistic your TAM is, so don’t fudge it or they won’t read any further.
  • your existing revenue stream: here lies the part of the DD that requires more work. Your investors are going to want to check your bank account to make sure you are being paid in real $, review your contracts with each and every customer, they are going to want to talk to them about their experience, and from there they are going to make up their mind on whether you have product-market fit and whether your revenue forecasts are hyped up or realistic.
  • your path to profitability: potential investors will also want to dig in your sales and marketing spend, to validate your cost of acquisition, customer lifetime value, and other key metrics that support ROI and profitable growth.

You should prepare most of it early on, and ideally test and validate your commercial proof of concept: that’ll give you a lot of credibility and help differentiate you from the crowd. It will also speed up the DD process and help get the money in the bank faster. Lastly, but -importantly- it will show YOU whether your current business has a path to profit or whether you should pivot, saving precious time and money in the process: what’s not to like?!



Max Bonpain

Helping startups and scale-ups hack growth. I love tech! Reach me on