Signing a term sheet is a big milestone for any startup. But once that happens, the next step is a detailed check by third-party auditors. This covers legal, financial, and secretarial aspects of the company.

The goal is simple. Investors want to be sure everything is in order before wiring funds. Founders want a clean report to avoid future problems. Auditors want to deliver reliable results. Yet the process often takes much longer than expected.

Here’s why it slows down, how it affects everyone involved, and how AI can make it smoother.

Why Does Post Term Sheet Due Diligence Take Time

• Too much data
  Even small startups have hundreds of files. These include incorporation papers, tax returns, payroll records, contracts, and compliance filings. Auditors have to review all of them carefully.
  
  
• Unorganized data rooms
  Startups store documents in different ways. Some use Google Drive, some Dropbox, some email. Auditors often spend days just sorting files before reviewing.
  
  
• Back and forth for clarifications
  Auditors find mismatches like payroll numbers not matching bank transfers, or shareholding details not matching filings. These need repeated clarifications, which drags things out.
  
  
• Manual checking
  Many tasks are still done by hand, such as verifying MCA records, cross-checking GST filings with accounts, or going through long contracts line by line.

How Delays Affect Stakeholders

• Founders
  Closure gets pushed out, putting pressure on runway. Founders lose time answering repeated queries instead of focusing on the business.
  
  
• Investors
  The deal loses momentum. Costs go up as lawyers and advisors spend more time. In some cases, investors even walk away if delays stretch too long.
  
  
• Auditors
  Teams get stuck in repetitive manual work. Reports take longer to deliver. Even when delays are not their fault, it reflects poorly on them.

Where AI Can Help

AI cannot replace legal, financial, or secretarial experts. But it can take over the repetitive and data-heavy parts, helping all three groups.

For Founders

• AI can suggest what files to upload, flag missing ones, and organize them neatly in a data room

• It can check for obvious mismatches, like differences between the cap table and MCA filings

• It can create summaries of long contracts or agreements so founders don’t have to prepare notes manually

For Investors

• AI can prepare quick red flag reports highlighting key risks like missed filings or mismatched accounts

• It can make comparisons across deals, showing common issues in portfolio companies

• It allows investors to ask questions like “Which statutory filings are pending” and get quick answers without waiting for a final report

For Auditors

• AI can pull structured data directly from GST filings, MCA records, payroll slips, or bank statements, saving hours of manual work

• It can automatically check numbers across statements and flag only the mismatches

• It can highlight unusual clauses or missing signatures in contracts or resolutions

• It can provide consistent checklists so the process is uniform across clients

Closing Note

Post term sheet diligence is necessary. It protects both investors and founders and builds trust before funds are transferred. But the way it is done today often slows everyone down.

AI can speed things up by handling the routine work. This lets founders, investors, and auditors focus on what matters most: judgment and decision making. The result is faster closures and fewer headaches for everyone.