The cases below are inspired by real files; the parties have been merged and altered beyond recognition.
The term sheet was signed; the press release was already drafted. Then due diligence began, and one morning the short email arrived: “We have decided not to proceed at this stage.” It rarely states a reason — and when it does, it’s a polite veil like “our priorities have shifted.” Yet the autopsy reports of deals that die in DD are strikingly similar. Here are the seven causes of death we see most often in the files that cross our desks.
1. A Broken IP Chain: Who Owns the Code?
The classic finding. The core of the product was written while the founder was still employed elsewhere, or the MVP was built by a freelancer with no contract. Under Turkish law, intellectual property does not migrate to the company by itself: there are statutory presumptions for works created by employees in the course of their duties, but freelancer and founder contributions require a written assignment. What the investor is really buying is the IP; a single broken link in the chain leaves the question “does the company actually own this product?” without an answer.
Prevention: Sign IP assignment and confidentiality agreements with everyone — founders included — from day one. Retroactive repair is possible, but getting a long-departed freelancer to the table years later is expensive.
2. A Dirty Cap Table
The founder who left without vesting, shares promised by email, uncapped SAFEs… This deserves its own article, and we wrote it: The Cap Table Autopsy. When a cap table problem surfaces in DD, investors rarely say no; they say “clean this up first.” And as the cleanup negotiation drags on, momentum dies — and at early stage it is momentum, not valuation, that closes rounds.
3. KVKK: The Folder Nobody Wants to Open
In the data room, the “Data Protection” folder is either empty or contains a single privacy notice downloaded from the internet. If the product processes user data, the investor will look for: the VERBIS registration, the privacy notice and consent architecture, the legal basis for cross-border transfers, and a data processing inventory. In a regime where the upper band of administrative fines now exceeds 17 million liras, “we’ll deal with it later” gets priced into the deal as a risk discount. See our KVKK compliance guide for the details.
4. Life Off the Payroll: Cash Top-Ups and “Invoice Employees”
Half the team invoices through sole proprietorships, bonuses are topped up in cash, the intern is uninsured. Founders call this frugality; investors read it as a contingent social security and tax liability, and respond in two ways: the estimated exposure comes off the price as an escrow, and “remediation” goes into the closing conditions. A disguised employment relationship is recalculated backwards, with employment entitlements attached — and the number always exceeds the founders’ estimate.
5. The Ticking Clause: Assignment and Change-of-Control
If 60 percent of your revenue comes from one enterprise customer, the investor will read that contract line by line. If they find a termination right triggered by a change of control, or an assignment prohibition, the investment itself becomes a risk of losing the customer. The same goes for exclusivity and non-compete undertakings: you have capped your own growth story by contract.
6. Empty Corporate Books
No general assembly for three years, the share ledger never updated, the capital increase resolution nowhere to be found. These look like formalities — but the validity of every share transfer rests on those books and resolutions. If the investor’s counsel cannot establish who validly owns the shares, they cannot sign off on closing. Fixable? Usually yes — but the round that was “two weeks from closing” turns into three months of corporate archaeology.
7. The Trust Fracture: The Gap Between What Was Said and What Was Found
The deadliest cause is the least legal one. The pitch said “40 customers under contract”; the data room produced 12 signed agreements. Asked about litigation, the founders said “none”; the court records showed a pending employment lawsuit. Each discrepancy is small on its own, but in the investor’s mind they merge into a single sentence: “What else don’t I know?” A cap table can be cleaned and KVKK compliance can be built — trust cannot be rebuilt within a DD timeline.
The Common Prescription: Prepare Before the Round Starts
All seven causes can be caught by an internal review — vendor due diligence — before the round begins. Start building your data room the day you decide to raise, not after the term sheet lands: incorporation documents, share ledger and resolutions, IP assignments, key contracts, payroll and social security records, the KVKK file. Two weeks of preparation beats three months of renegotiation and a few points of discount.
If you want your company screened through an investor’s eyes before you go to market, write to us — let us find it so they don’t.
