A founder emails me, elated: the term sheet is signed. Then, two weeks later, a second email that is a lot less calm. The investor's technical reviewer has started asking hard questions, the closing date is slipping, and nobody warned them this part existed. The term sheet felt like the finish line. It was the starting gun for confirmatory diligence.
A term sheet is, with a few exceptions, non-binding. It sets the framework and the price, and it signals real intent, but it is a promise to close if what you have represented turns out to be true. Confirmatory diligence is where "if it turns out to be true" gets tested. For technical founders, that means someone finally looks under the hood.
Why there is a second round at all
Before the term sheet, most investors do market and founder diligence: is this a real market, is this a team worth backing. They do not usually pull your codebase apart first. That deeper technical review often happens after, once both sides have committed enough to justify the effort.
The stakes flip at this point. Before the term sheet, a finding might lower the price or add a condition. After it, a serious finding can collapse a deal that everyone already believed was done. Early-stage investors close most of the term sheets they sign, but "most" is not "all," and the ones that die usually die here, on something that verification surfaced that the pitch had smoothed over.
What confirmatory diligence looks at
The reviewer is confirming that reality matches the story. On the technical side, that tends to concentrate in a few places.
The claims you made in the pitch
Every number and capability in your deck is now a claim to be verified. If you said the platform handles a certain load, they will look for evidence. If you said a feature is live, they will find it in the product. This is the moment a deck number becomes something you have to prove, and if there is a gap between the story and the system, this is where it opens. A team that has already been through a real technical diligence process knows how long this can take and does not treat the signed term sheet as permission to relax.
Ownership and provenance
Who wrote the code, and does the company own all of it. Unsigned IP assignments from a founder or an early contractor are one of the most common late-stage deal-stallers, because they mean the company may not fully own its core technology. AI-generated code raises the same question in a new form: how much of the codebase was machine-written, and did anyone who understands it review that code. Unreviewed generated code reads to a diligence team as unaudited code.
Security and key-person risk
A single serious security finding can pause a deal indefinitely, especially in anything that touches money or health data. So can discovering that the entire system lives in one person's head. If your whole architecture is held together by one engineer's memory, a reviewer will flag it as risk the investor is being asked to underwrite.
What to do before it starts
The best time to prepare for confirmatory diligence is before the term sheet, not after. By the time it begins, you want no gap between what you said and what a reviewer can verify.
Do a quiet self-audit early. Reconcile every technical claim in your deck against what actually exists. Get the IP assignments signed, including from that contractor you used for three weeks two years ago. Make sure the technical half of your data room is not empty, because an empty technical data room turns a two-week confirmatory pass into a two-month scramble. And prepare your engineers to answer honestly, because a reviewer trusts what the team says over what the deck claims.
If you are between a signed term sheet and a close right now and the technical questions are getting sharper than you expected, that is exactly the moment borrowed judgment helps. Walking a founder through confirmatory diligence is something I do, and if the closing clock is running, book a call.
FAQ
Can an investor really walk after signing a term sheet?
Yes. The term sheet is mostly non-binding. It commits both sides to try to close on those terms, but if confirmatory diligence surfaces something material that was not represented, the investor can renegotiate or walk. Serious findings after the term sheet are the most common reason a solid-looking deal dies.
How long does confirmatory diligence take?
Usually two to four weeks for the technical portion, longer if the data room is disorganized or claims do not reconcile cleanly. Diligence that used to take a week now often runs a month or more, so plan your runway around a close that is weeks out, not days.
What is the single most common late-stage killer?
Unsigned IP assignment agreements. If a founder or early contractor never assigned their work to the company, the company may not own its own product, and that is a problem no investor will close over until it is fixed.
Should I slow down my team during confirmatory diligence?
No, but you should protect the one or two people the reviewer needs and make sure their answers match your documents. The fastest way to spook a reviewer is to have an engineer describe a system that does not match the story in the data room.