Getting Funded, Step 4: Due Diligence

Just the technical bullet points: "block diagram of the product’s components, inputs/outputs to processes in the diagram, internal and external interfaces to the product, languages, frameworks, libraries used, extensibility, portability, openness, standards compliance, scalability, development infrastructure, IDE, Version control, Build tools, Defect tracking systems, Development methodology"

Is this really a normal amount of information investors request from companies? What's the point of knowing all of this? Asking it implies that #1 the company has all this data in place, otherwise it's wasting time getting it together, #2 the investors know better than the founders about architecture, technology and toolsets and #3 a significant amount of times a term sheet is revoked because of trouble with build tools, standard compliance or a "development methodology". I'm feeling the author just listed everything he could think of rather than everything that actually matters.

Be careful of DD done prior to a term sheet, as it allows the VCs to retain optionality on your company in a way that is pretty cheap for them and very expensive for you. Arranged calls with bizdev and customer prospects from a VC's rolodex looks like progress but doesn't necessarily mean anything.

I'd love to know how people who are good at this qualify VC prospects and decide what kinds of up-front due diligence to acquiesce to.