Here is a paradox that comes up regularly when new angel investors join Brisbane Angels. Someone with a background in institutional investing (private equity, corporate finance, a major accounting firm) sits through their first DD process and is quietly astonished by how little work seems to be happening. Meanwhile, someone coming to angel investing fresh, without that background, is paralysed by how much there is to look at. The experienced person thinks we’re being reckless. The newcomer thinks they’ll never be qualified to invest in anything.
Both instincts are wrong, and understanding why is most of what you need to know about angel due diligence.
The research on this is reasonably clear. Doing some DD produces better returns than doing none. Beyond a certain threshold, however, the incremental benefit flattens out. The widely cited figure from studies by Robert Wiltbank and others was 20 to 40 hours as the zone where returns improve meaningfully. Beyond that, you’re spending time that isn’t improving your decisions.
That figure is pre-AI. It assumed that the groundwork of competitor analysis, market sizing, legal document review, cap table verification, and patent searches was slow. It no longer is. A task that took a day in 2019 takes an hour in 2026. The threshold has moved, and the 20–40 hour rule is now a relic.
Which means the question isn’t how many hours to spend. It’s how to spend the right hours on the right things.
A note before I go further. I have been an active member of Brisbane Angels since 2013 and was a key driver of developing the group’s deal flow processes, including the due diligence framework I describe below. MooCoo Ventures has been managing Brisbane Angels since 2023 and project manages every deal that comes through. The MooCoo syndicate offers external investors the opportunity to co-invest alongside Brisbane Angels in the deals that clear this process. What follows is a description of that process from inside it.
Major on the majors
The most useful framing for angel DD comes from the Seraf Compass eBook, which Brisbane Angels adopted as the basis for its own DD approach. The core principle: major on the majors. Every deal has two or three critical risks, the things that have to be true for the investment to work. Identify those, go deep on them, and treat everything else as background.
Brisbane Angels adds one important structural element to the Seraf framework: before DD begins, the group documents an investment thesis. This is a written statement of why we are considering investing. It’s the positive case, and the specific uncertainties that need to be resolved. The DD process then checks the thesis. Known knowns get verified and known unknowns get stress-tested. That’s the scope of the exercise.
This is deliberately narrower than a full financial DD. A comprehensive institutional process tries to surface unknown knowns, the things the investor doesn’t yet know they should be asking about, and ideally unknown unknowns too. At the early stage, that ambition is both overkill and cost-prohibitive. The company may be two people and a pitch deck. The value of surfacing every possible risk is not proportionate to the capital being deployed or the stage of information available. The investment thesis defines what “enough” looks like and enough is when you’ve checked it.
The thesis maps to the fourteen DD factors outlined in the Seraf eBook, which cover everything from team and technology to market size, financials, exit strategy, and deal terms. Not all fourteen will be equally relevant to every deal. The thesis makes explicit which ones are load-bearing for this particular investment, and the DD process follows from there.
This connects directly to the framework I described in If I can’t articulate why it will fail. DD is the process of stress-testing the one or two unsure areas that decide a deal. Once the investment thesis has named those areas, the scope of the work narrows considerably.
The reason Brisbane Angels standardised on Seraf’s framework rather than leaving each member to develop their own approach is simple: if everyone is doing their own DD anyway, a shared framework produces better collective work than independent reinvention. A common language for risk categories, a common data room template, a common questionnaire when leading a deal. These create consistency and make it easier to combine perspectives across a group with diverse expertise.
The filters before DD starts
Brisbane Angels doesn’t formally start DD until after pitch night, and only when there is sufficient investor interest to make it worth proceeding. This sequencing matters more than it might appear.
By the time a company reaches pitch night, it has already passed through multiple filters. Companies unlikely to survive DD have generally been identified and discarded earlier. Pitch night itself is a further filter. A room full of experienced investors watching a founder present is a reasonably good signal-extraction mechanism.
And the “sufficient investor interest” test is not merely administrative. There is real wisdom in the crowd. When experienced angels with pattern recognition across many sectors and deal types lean in independently, that collective signal carries genuine weight. It means DD is starting from a higher base than it would if every company that knocked on the door went straight into a formal process.
The data room — what’s missing tells the story
Founders are given a template for what the data room should contain before DD begins. The template is itself an instrument. What’s there matters. What’s missing matters more.
A founder who can’t produce clean cap table documentation is telling you something. A founder who hasn’t thought about IP assignment, or who has no record of key commercial agreements, or whose corporate structure turns out to be different from what was described in the pitch — each of these is information. Gaps against the template become specific items to probe in the DD call rather than general areas of concern.
Litigation is one of the cleaner red flags at the early stage and is often a deal breaker. The preference is for any litigation to be resolved before a company pitches. An undisclosed matter discovered during data room review is a different kind of signal. It may not be fatal to the company, but a founder who is either disorganised enough to forget it or evasive enough to omit it presents the same problem.
When Brisbane Angels leads a deal, a comprehensive questionnaire goes to the founder alongside the data room template. AI is now genuinely useful for reviewing the responses. It identifies internal inconsistencies, flags departures from what’s typical, and highlights the specific questions worth raising in the DD call.
What AI has changed
This deserves its own section because it changes the arithmetic of the whole exercise.
Competitor and market analysis used to be genuinely time-consuming. AI does a credible first pass in minutes. It’s not a replacement for expert judgment, but a solid foundation that would have taken days to build manually. Legal document review is similar: AI flags departures from market standard in a term sheet or shareholders agreement quickly and accurately, without requiring a full legal review of every clause. Data room review and questionnaire analysis: AI identifies inconsistencies and surfaces the questions worth asking. Patent work: a good patent attorney in 2026 is using AI for freedom-to-operate searches and claim analysis as a matter of course.
The 20–40 hour threshold assumed all of this was slow. It assumed that reading documents, researching markets, and reviewing legal terms required proportionate human hours. The work still requires human judgment. The inputs to that judgment now arrive much faster. A serious DD process that might have consumed thirty hours four years ago can now be done well in a fraction of that time.
As I explored in Forewarned is Forearmed, this is part of a broader convergence on both sides of the table. The same tools that compress DD for the investor compress preparation for the founder. The bar hasn’t moved but the speed at which it gets applied has.
The deep dive call
Brisbane Angels’ preferred DD format is a single call with the founder. It’s typically two to three hours, with multiple BA members present across different domains of expertise.
This format is hard to fake. A founder who is not genuinely on top of their business will begin to show it somewhere across two to three hours of probing from experienced investors who are asking different kinds of questions. The water engineer asks about the technology. The finance person asks about the unit economics. The commercial operator asks about the go-to-market. Running that gauntlet for two hours, without contradicting yourself, without deflecting, without the gaps in your knowledge becoming apparent is difficult.
The inverse is equally true. A founder who handles the session well, answers the hard questions, acknowledges uncertainties honestly, and engages with the challenge rather than deflecting it is giving a strong positive signal. The format concentrates the group’s collective expertise efficiently, and the collective expertise of a group like Brisbane Angels is genuinely deep. This is something a VC analyst conducting DD over a week with access to a much narrower range of domain knowledge cannot replicate.
Not doing it all yourself
Two other mechanisms let an angel investor calibrate their effort intelligently.
The first is subject matter experts. Where a deal has a specific technical component, Brisbane Angels leans heavily on members with direct domain expertise. A senior water engineer with thirty years of experience can assess a water management technology in an hour in a way that no generalist can. If they like it, we lean in and if they don’t, we lean out. This is a structural advantage of an angel group over a fund. The collective expertise of the membership is deep, varied, and immediately available.
The second is co-investment alongside an ESVCLP. These days, with so many early-stage ESVCLPs operating in the Australian market, Brisbane Angels co-invests regularly. The relationship is genuinely complementary: ESVCLPs are required to do DD under their regulatory framework, but they can’t rely on angel groups to satisfy that requirement; they have to do it themselves. That means an angel co-investing alongside an ESVCLP is building on a foundation of serious, independently conducted work. The angel still forms their own view and still focuses on the critical issue, but they’re starting from a much higher base.
When co-investing with any deal lead, the DD process has a second dimension: you are doing DD on the deal, and you are doing DD on the deal lead. Has this person done meaningful early-stage investing before? Are they conflicted because they’ve advised the company, or will take a role in it? Are they investing their own money? A deal lead who won’t put capital in is a red flag. Do they independently agree on the same two or three critical issues you’ve identified? Alignment on what matters is a good signal. Significant disagreement about what the key risks are is worth understanding before you commit.
The non-negotiables
Some things are always worth checking regardless of how clean everything else looks. Does the company legally exist? Are the shares properly constituted? Background checks on founders can’t be skipped, not because fraud is common at the early stage, but because basic fit-and-proper verification is housekeeping. IP-heavy deals deserve more: when the thesis depends on a patent, the patent needs proper review. University-assigned IP carries an implicit quality signal. A good patent attorney is itself a positive signal.
Where customers exist, customer reference checks matter. Where they don’t — which is most of the early stage — the question shifts to whether the problem the company is solving is real and acute enough to generate customers when they do exist. This leads back to the founder origin story and the Problems, Problems, Problems framing.
Governance — a brief flag
Governance deserves its own post. The short version: VC deal leads will typically do a priced round, negotiate a shareholders agreement, and put someone on the board. As an angel, taking a board seat is possible, but it is not much fun being a director of a failing company, and we don’t recommend it as a default. This is one of several reasons SAFEs are a practical, cost-effective solution for early-stage angel investment. They avoid the cost and complexity of a priced round and its associated governance architecture, which is particularly sensible when a deal is structured as a bridge to a VC round that will revisit the terms anyway.
The portfolio implication
Excessive DD is, in the end, a cadence problem. The portfolio mathematics in Roll the Die argues for a diversified portfolio of 25 to 40 investments, deployed over roughly seven years. If every deal consumes too many hours, an angel can only assess a handful per year, which makes building that portfolio nearly impossible.
AI has changed the arithmetic. In your corner, you now have a well-structured data room, a deep dive call with multiple BA members, subject matter experts in the room, and AI doing the groundwork. The work that used to take thirty hours now takes considerably less, which means the portfolio the maths requires is more achievable than it used to be.
The right amount of DD is enough to stress-test what needs to be believed. No more. And in 2026, enough is less than it used to be. Which is, in the end, the reason MooCoo exists in the form it does: to make the process described here accessible to investors who want the work without having to run it themselves.
Richard Moore — MooCoo Ventures
Richard Moore is co-founder of MooCoo Ventures, an angel syndicate that co-invests alongside Brisbane Angels, one of Australia’s most active angel groups. He has made over eighty personal angel investments since 2013.
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