This has been made to help you
-not waste money whilst fundraising
-shorten the time from when you've asked for the money to when you receive it
-make investors think you know what you're doing
-prepare yourself for the fundraising process by making the due diligence template pre-fundraise
Trying to raise money from VC's is painful. After all the time and effort of making your pitch deck and financial model and actually attaining meetings, the hardest and most boring work hasn't even started yet. It starts post-VC interest.
In case you don't know, due diligence is something the bosses of the VC's do to make sure that the VC's aren't investing in a bad company with lots of debt or a bad idea or outdated technology or questionable founders.
Due diligence is making sure that the company has a sound background and setup. If it's a really big investment the company is after, some VCs hire a professional team to check up on legal matters or financial accounts. In the case of an angel stage company, there won't be much checking up to do as the company is generally so young that it won't have had a lot of time to get much stuff wrong. However even for these companies, check-ups still have to be done to make sure the VCs know what has gone on before they throw large amounts of money at you.
So the objective of due diligence then is to really make sure that your company is able to be invested in. Due diligence is also used to make sure every claim in your pitch was correct.
Due diligence begins once the 'term sheet' is given and both parties have signed the dotted line. A section in the term sheet mentions 'conditions to closing' that obliges DD to be carried out before the end documents are signed and the money is received.