DiligenceSquared Leverages AI to Drastically Cut Private Equity Due Diligence Costs and Time

The intricate world of mergers and acquisitions (M&A) is notoriously characterized by its protracted timelines and substantial financial outlays, even for the most formidable and extensively staffed private equity (PE) firms. Beyond the countless hours dedicated to strategic meetings with senior executives of prospective target companies and the meticulous financial modeling required to forecast potential outcomes, these sophisticated investment groups routinely allocate millions of dollars to an array of external advisers. These indispensable specialists include highly skilled accountants, experienced legal counsel, and elite management consultants, each playing a critical role in de-risking and optimizing complex transactions.

The financial burden associated with external advisory services is particularly acute because these expenses are typically non-reimbursable if a deal ultimately fails to close. This inherent risk compels PE firms to exercise extreme caution, waiting until they have cultivated a high degree of certainty regarding their interest in a target before committing to the engagement of costly specialists. Renowned consulting firms such as McKinsey & Company, Boston Consulting Group (BCG), or Bain & Company, often collectively referred to as the "MBB" firms, are frequently commissioned to conduct exhaustive commercial research. This research delves deep into market dynamics, competitive landscapes, customer behavior, and the target company’s operational viability, forming the bedrock of informed investment decisions. Delaying this crucial step, while financially prudent, can also slow down the deal process and potentially lead to missed opportunities.

Enter DiligenceSquared, an innovative startup that emerged from Y Combinator’s prestigious Fall 2025 cohort. The company asserts that it can revolutionize this aspect of the M&A process by harnessing the power of artificial intelligence (AI). Through its AI-driven platform, DiligenceSquared promises to deliver top-tier, consultancy-quality commercial research at a mere fraction of the traditional cost, fundamentally reshaping how PE firms approach early-stage due diligence.

The credibility of DiligenceSquared’s audacious claim is significantly bolstered by the profound expertise of its co-founders, Frederik Hansen and Søren Biltoft, both of whom possess extensive backgrounds in private equity due diligence. Frederik Hansen, before co-founding DiligenceSquared, served as a principal at Blackstone, one of the world’s preeminent global private equity firms. In this pivotal role, Hansen was responsible for commissioning and overseeing these exact types of commercial diligence reports for multiple multi-billion-dollar buyouts, giving him a first-hand understanding of the requirements, challenges, and costs associated with traditional methods. Complementing this, Søren Biltoft dedicated seven years to BCG’s highly regarded private equity practice, where he was instrumental in leading numerous comprehensive diligence efforts. His experience at a top-tier consulting firm provides an invaluable insider’s perspective on the methodology, quality standards, and strategic insights expected from such reports.

Since its launch in October, the combined industry experience and extensive networks of Hansen and Biltoft have propelled DiligenceSquared to achieve impressive early traction. Hansen recently informed TechCrunch that the startup has already successfully completed multiple projects for several of the world’s largest PE firms, as well as various mid-market funds. This rapid client acquisition among industry leaders serves as a powerful validation of DiligenceSquared’s value proposition and its ability to meet the rigorous demands of sophisticated institutional investors. The appeal to both large and mid-market funds underscores the universal need for more efficient and cost-effective due diligence across the private equity spectrum.

This compelling early success proved instrumental in attracting significant venture capital backing. Damir Becirovic, a distinguished former partner at Index Ventures—a global venture capital firm renowned for backing groundbreaking companies—was convinced by DiligenceSquared’s potential. Becirovic subsequently led the startup’s $5 million seed funding round through his newly established VC firm, Relentless. This investment not only provides crucial capital for DiligenceSquared’s growth but also signifies a strong vote of confidence from a seasoned investor with a track record of identifying disruptive technologies.

At the core of DiligenceSquared’s innovative approach is its strategic deployment of AI voice agents. Instead of relying on the prohibitively expensive human capital of traditional management consultants, these AI agents are engineered to conduct in-depth interviews with customers of the companies that PE firms are considering acquiring. This method allows for a scalable, consistent, and cost-effective way to gather critical qualitative data directly from the market. Customer interviews are a cornerstone of commercial due diligence, providing invaluable insights into product-market fit, customer satisfaction, retention rates, competitive positioning, and future growth opportunities, all of which are vital for assessing a target company’s true value and potential.

While DiligenceSquared leverages an AI-interview model similar to those employed by consumer research startups like Keplar, Outset, and Listen Labs—the latter of which notably raised $69 million at a $500 million valuation in January—Hansen and Biltoft emphatically assert a fundamental distinction. They argue that DiligenceSquared’s due-diligence process and its final outputs are inherently different from the generalized consumer research provided by these counterparts. The unique demands of private equity commercial due diligence necessitate a far greater degree of nuance, precision, and strategic depth. PE firms require insights tailored to investment decisions, often involving complex business-to-business (B2B) relationships and interviews with C-suite executives, which require a sophisticated understanding of industry value chains and financial implications.

Traditionally, PE firms might budget anywhere from $500,000 to $1 million to engage a top-tier firm like McKinsey, Bain, or BCG. For this investment, consultants would typically interview dozens of corporate customers, often including C-suite executives, and then synthesize these insights with extensive proprietary market data to produce comprehensive reports, frequently exceeding 200 pages. These reports offer not just data, but deeply analyzed commercial insights and strategic recommendations critical for high-stakes investment decisions. Recognizing the imperative for maintaining such high standards, DiligenceSquared incorporates a crucial human element into its AI-driven process. Senior human consultants are actively involved in verifying the accuracy and the commercial insights derived from the final output, ensuring that the AI’s groundwork is robustly validated and strategically sound.

The significant efficiency gains realized by having AI perform much of the foundational data gathering and analysis translate directly into dramatic cost reductions. DiligenceSquared claims it can deliver this high-quality analysis for approximately $50,000, representing a potential cost saving of 90% or more compared to traditional consultancy fees. This monumental difference in pricing has profound implications for how PE firms manage their deal pipelines.

As Hansen articulated, "We are taking these great insights that were previously reserved for the very big decisions, and now we make them more accessible." The democratizing effect of this lower price point is already evident. PE firms are demonstrating a significantly increased willingness to engage DiligenceSquared much earlier in their evaluation process. This allows them to conduct rigorous commercial diligence well before they have developed a high conviction in a particular deal, enabling broader exploration of potential targets, earlier identification of red flags or compelling opportunities, and ultimately, a more agile and data-driven approach to investment screening. This ability to conduct preliminary, yet robust, diligence at an early stage can prevent wasted time and resources on deals that are unlikely to materialize, while also highlighting hidden gems that might otherwise be overlooked.

DiligenceSquared is, however, not alone in its endeavor to disrupt the established due diligence market. The burgeoning landscape of AI-powered solutions is attracting considerable investment. Its primary competitor, Bridgetown Research, for instance, successfully raised a substantial $19 million Series A funding round in February 2026, co-led by two other prominent venture capital firms, Accel and Lightspeed. This competitive environment underscores the significant market demand for innovative solutions in due diligence and is likely to spur further advancements and differentiation within the sector.

The founding team of DiligenceSquared is further strengthened by the presence of Harshil Rastogi, a former Google engineer, who co-founded the company alongside Frederik Hansen and Søren Biltoft. Rastogi’s deep technical expertise in AI and engineering from a leading technology company complements the private equity and management consulting backgrounds of Hansen and Biltoft, forming a well-rounded and formidable leadership team capable of navigating both the technological complexities and the intricate demands of the financial industry. This blend of industry insight and technical prowess is critical for building a scalable and impactful AI solution for such a specialized market.