Due Diligence Goes Both Ways: 10 Questions Founders Should Ask a PE Firm

They will spend months on you — your revenue quality, your customer concentration, your team's weak spots. Your due diligence on the PE firm, if you're like most founders, will be a few good dinners and a reference call with two founders they picked for you.

I know because that's roughly how mine went. My buyer was a small, first-time fund with no track record to research. I negotiated the structure hard — pushed back on every earnout construction except what I fully controlled, landed on a simple holdback, and that decision saved me. But that's where my diligence ended. I never asked the day-after operational questions. I didn't even ask how much experience the people I'd be working with had in my industry. That one turns out to be critical.

If what you want from the deal goes beyond price, your due diligence has to go beyond the money terms. Here are the questions I'd ask now — and what each answer actually tells you.

The due diligence questions to ask a private equity firm

1. "Tell me about a portfolio company that missed its year-one plan. What did you do in the ninety days after?" A real answer names a company and a change. "We work collaboratively through challenges" is not an answer — it's a values statement hiding a story.

2. "When did you last replace a founder, and how did it unfold?" Every firm has. You're listening for any self-reflection at all — or whether every departed founder simply "wasn't right for the next phase."

3. "Who exactly will I work with day to day — and how many companies does that person cover?" The pitch is a partnership; the reality is a person. You want a name and a load. Nine companies per operating partner is a monthly phone call, not a partner.

4. "Which decisions needed your approval last quarter, across the portfolio?" Everyone says "we back management." Last quarter's real approval requests show where the line actually sits.

5. "Connect me with two founders you've acquired — one story that went well, one that didn't." The reaction to the ask is the test. Every firm has a happy reference ready; almost none volunteer the other kind. (And find the references they didn't offer yourself — here's how.)

6. "How many founders from your current fund are still meaningfully involved two years in?" Not "do founders stay" — a number. They know it. Whether they say it is the answer.

7. "What breaks first in this company after close?" Can't be prepped. A firm that studied you says something uncomfortable and accurate — usually about how much routes through you. "It's a well-oiled machine" means they think they're buying something that runs itself, and year one will prove otherwise at your team's expense.

8. "What's your plan for the knowledge that only exists in my head?" Most firms have a slide. Almost none have a plan. The conversation that follows tells you whether you're a dependency to eliminate in ninety days or an asset that transfers over years.

9. Walk them through three scenarios — bad, realistic, optimistic — and ask how they'd work with you in each. Dressed in budget language, so it's safe. You don't need the answer; watch the faces on the bad scenario. Thirty seconds of that beats any reference call.

10. Raise a hard problem you already solved — without saying so — and ask how they'd approach it. Grade the process, not the answer. Real operators start with questions — the data, the people closest to it, the customers. Whoever solves from the armchair will run your company from one.

Red lights when vetting a PE firm

• The finance-only lens. Ask what data they'll track. CAC, ARR, revenue — a finance answer. Demand signals, pipeline quality, real customer qualification — an operator's answer. Finance people who believe they understand operations are the most expensive partners to discover late.
• The Gartner tell. A generalist making confident assumptions about your niche because they read an analyst report. Not knowing your market is fine — not knowing that they don't know is the red light.
• Solution-first thinking. Answers that arrive before questions, in a business they've owned for zero days.
• The base-case pivot. Visible discomfort at the bad scenario, and a quick steer back to the plan.
• Blame language. Stories where every failure belongs to someone who's no longer there.

When founders should ask: before the LOI

Before the LOI. After exclusivity, your leverage to ask — and the firm's incentive to answer honestly — mostly evaporates. The PE firm's diligence window on you is your due diligence window on them. And don't rely on the conference room alone — the real signals show in face time: sit with the people you'll actually work with, join a day of their rhythm with a portfolio company, talk to people who know them outside the deal. These questions are one leg of three: the research you do without them, and the terms you negotiate for yourself, are the other two.