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url: /docs/diligence-01-overview-and-concepts.md
---
# Diligence — Overview & Concepts

Diligence gives each deal you're formally evaluating its own workspace —
somewhere to collect documents, run Cairn Intelligence against them, track
a checklist, flag risks, and manage outside advisors, all in one place.

## What problem it solves

Diligence usually means a data room of hundreds of files, a checklist in a
spreadsheet, red flags in email threads, and an investment memo written from
scratch the night before IC. The hardest part is trusting that every claim
in the memo is actually in the documents.

| Feature | The problem | What Cairn does |
|---|---|---|
| Workspace | Documents, tasks, and concerns for one deal live in different places | One workspace per deal: documents, checklist, red flags, and advisors together |
| Checklist and red flags | It's unclear what's been checked and what's still open | Track each item's status, and record each red flag with a severity |
| Financial Extraction | Someone reads every document to find ARR, growth, margin, and burn | Cairn Intelligence pulls those metrics out of your documents |
| Cairn Thesis | Strengths and risks are summarized from memory, and assumptions go untested | Findings and assumptions, each cited to an exact quote, with each assumption marked supported, contradicted, or not established, plus bear/base/bull scenarios you control |
| Investment Brief | Before a first partner conversation, nobody has time to read the whole data room | A short, cited read of your documents: strengths, risks, observations, and the questions to ask next |
| IC Memo | The memo takes days and repeats work already done | A full draft IC memo built from your Thesis, Financial Extraction, and documents, exportable to Word |
| Cited quotes | AI summaries can invent facts | Every claim must quote your documents exactly. If a quote can't be found, the result is rejected, not saved |

> The examples below use a made-up firm and companies to show how each
> feature is used.

> **Example: testing a growth claim.** The Lumen Health deck says "ARR grew
> 3x last year". The team uploads the deck, the 2025 financials, and the
> customer list. Financial Extraction finds ARR of $6.1M and growth of 140%.
> Cairn Thesis lists the assumption "ARR tripled in 2025" as
> **contradicted**, quoting the financials' line showing $2.5M to $6.1M.
> The analyst records a medium red flag, "Growth overstated in deck", and
> sets the bear case to 60% growth. The IC Memo drafted from all of this
> carries the same quotes, so every number in front of IC can be traced to
> its source.

## The workspace list

Every diligence workspace you've created is listed with its company name,
when it started, how many documents are uploaded, how many red flags are
open, and how far its checklist is complete. Each workspace also has a
status: **Active**, **Complete**, or **On Hold**.

## The workspace layout

Opening a workspace shows five tabs:

* **Overview** — a summary of the workspace at a glance: completion
  percentage, document count, open checklist items, red flag count, how
  many advisors are engaged, a condensed financials snapshot, and the
  latest IC Memo's recommendation, if one has been generated.
* **Documents** — upload documents into categories (Financial Statements,
  Legal, Cap Table, Management, Market Analysis, Technical, or Other),
  browse everything uploaded so far, and preview a selected document
  without leaving the workspace.
* **AI Analysis** — Cairn Intelligence's four features for this
  workspace, chosen from the menu at the top: **Cairn Thesis**,
  **Investment Brief**, **IC Memo**, and **Financial Extraction**. See
  [Key terms](#key-terms) below for what each one does.
* **Checklist & Flags** — your diligence checklist and your red flags.
* **Advisors** — outside firms (legal, financial, technical, etc.)
  engaged for this deal.

## Key terms

* **Workspace** — the diligence process for one deal, containing its own
  documents, checklist, red flags, advisors, and Cairn Intelligence
  outputs.
* **Cairn Intelligence** — the product's AI features. Every claim Cairn
  Intelligence makes about your company is backed by an exact quote from
  one of your uploaded documents — it never cites something that isn't
  actually in the text you gave it. See
  [How-Tos & Workflows](diligence-02-how-tos-and-workflows.md) for how to
  generate each one.
* **Financial Extraction** — Cairn Intelligence reads your documents and
  pulls out ARR, revenue, growth, gross margin, NRR, burn rate, runway,
  and headcount. One result per workspace; regenerating replaces it.
* **Cairn Thesis** — a cited investment thesis: strengths, risks, and
  observations from your documents, material assumptions with their
  evidence status (supported, contradicted, or not established), and
  bear/base/bull ARR scenarios you control. Thesis is **versioned** —
  every regeneration keeps the prior version, so you can look back at
  what the thesis said before.
* **Investment Brief** — a quick, cited read of your documents: strengths,
  risks, and observations, each with the exact quotes behind it, plus
  questions to resolve with management. One brief per workspace;
  regenerating replaces it and keeps your analyst notes. Downloadable as a
  PDF.
* **IC Memo** — a full Investment Committee memo synthesized from your
  Cairn Thesis, Financial Extraction, and documents: executive summary,
  thesis narrative, market, financials, management assessment, risks,
  comparable companies, valuation, and a recommendation. Exportable to
  Word (.docx). Like Thesis, IC Memo is versioned. Generating one
  requires a Cairn Thesis and a Financial Extraction to already exist for
  the workspace.
* **Red flag** — a risk or concern you've identified, with a severity of
  high, medium, or low.
* **Checklist item** — a task or question to resolve as part of diligence,
  with a status of not started, in progress, complete, or not applicable.
* **Advisor** — an outside firm engaged to support the diligence process.