The intricate and often opaque world of mergers and acquisitions (M&A) has long been characterized by its substantial costs and protracted timelines, a reality acutely felt even by the most well-resourced private equity (PE) firms. Central to this process is due diligence, a critical phase where potential investments are rigorously scrutinized. This exhaustive examination, particularly commercial due diligence, typically involves PE firms committing significant financial resources – often millions of dollars – to external advisors, including an army of accountants, lawyers, and elite management consultants from firms like McKinsey, Boston Consulting Group (BCG), and Bain & Company. These costs are exacerbated by the unfortunate reality that such expenses are non-reimbursable if a deal ultimately fails to materialize, compelling PE firms to defer engaging these costly specialists until they possess a high degree of conviction in a potential acquisition.
This landscape of high stakes and high costs is now facing a significant disruption from DiligenceSquared, a burgeoning startup that emerged from Y Combinator’s prestigious Fall 2025 cohort. The company announced a $5 million seed funding round led by Damir Becirovic’s new venture capital firm, Relentless, signaling investor confidence in its innovative approach. DiligenceSquared posits that through the strategic application of artificial intelligence, it can deliver commercial research of comparable quality to top-tier consultancies, but at a mere fraction of the traditional expenditure. This proposition holds the potential to fundamentally alter how private equity firms assess opportunities, making high-quality diligence more accessible and economically viable earlier in the deal lifecycle.
The Costly Conundrum of Traditional M&A Due Diligence
Private equity firms operate in an intensely competitive environment, constantly seeking lucrative investment opportunities. The M&A process is a multi-stage journey, beginning with target identification and initial screening, progressing through non-binding offers, and culminating in a comprehensive due diligence phase before a binding offer can be made. It is during this due diligence phase that the true value, risks, and strategic fit of a target company are unearthed.
Commercial due diligence, a specialized segment of this process, focuses on understanding the target company’s market attractiveness, competitive positioning, customer dynamics, and growth prospects. Traditionally, this involves extensive primary and secondary research, including numerous interviews with customers, suppliers, competitors, and industry experts. For a large-scale buyout, top-tier consulting firms might charge anywhere from $500,000 to over $1 million for this work, which can involve dozens of interviews with C-suite executives and the production of dense, 200-page reports synthesizing proprietary market data with qualitative insights.
The financial burden extends beyond just consulting fees. According to industry reports, the average cost of M&A advisory services for a deal can range from 1% to 5% of the transaction value, and for larger deals, this can still translate into tens of millions of dollars when legal, accounting, and other specialist fees are factored in. With global M&A activity regularly surpassing several trillion dollars annually, the total expenditure on due diligence alone represents a significant economic segment. The inherent risk is that if a deal falls apart – a not uncommon occurrence in M&A – the PE firm absorbs these considerable costs without an acquisition to show for it. This financial disincentive often leads firms to delay comprehensive due diligence, potentially missing red flags or opportunities that could have been identified earlier.
DiligenceSquared’s AI-Powered Paradigm Shift
DiligenceSquared’s core innovation lies in its application of advanced AI, specifically AI voice agents, to automate and streamline the primary research component of commercial due diligence. Instead of human consultants spending countless hours conducting interviews, the startup leverages AI to engage with customers of companies under consideration by PE firms. This technological pivot significantly reduces the labor costs associated with traditional consulting models.
The startup’s co-founders bring a potent combination of deep industry expertise and technological prowess. Frederik Hansen, a former principal at Blackstone, possesses firsthand experience in commissioning these high-stakes reports for multi-billion-dollar buyouts. His understanding of what PE firms truly need from commercial diligence is invaluable. Complementing Hansen is Søren Biltoft, who dedicated seven years to BCG’s private equity practice, where he led numerous diligence efforts of this precise nature. This foundational understanding of both the demand and supply sides of the diligence equation is critical. Adding a crucial layer of technical expertise, Harshil Rastogi, a former Google engineer, co-founded DiligenceSquared, bringing the necessary engineering acumen to build and scale the AI-driven platform.
Since its official launch in October, DiligenceSquared has rapidly gained traction. Hansen reported to TechCrunch that the company has already completed multiple projects for several of the world’s largest PE firms and a range of mid-market funds. This early success and industry validation were pivotal in attracting the investment from Relentless.
While other startups like Keplar, Outset, and Listen Labs (which notably raised $69 million at a $500 million valuation in January) have also ventured into AI-powered customer interviews for consumer research, Hansen and Biltoft emphasize a fundamental distinction. The due diligence process for private equity involves a higher degree of complexity, nuance, and financial risk. The insights required are not merely about consumer sentiment but delve into market dynamics, competitive positioning, and strategic implications that directly impact investment decisions. To ensure the veracity and depth of its analysis, DiligenceSquared integrates senior human consultants who meticulously verify the accuracy and commercial insights of the final AI-generated outputs. This hybrid model combines the efficiency of AI with the critical judgment and experience of human experts.
This innovative approach allows DiligenceSquared to offer its comprehensive analysis for approximately $50,000 – a staggering tenth or even twentieth of the cost charged by the traditional ‘Big Three’ consulting firms for comparable outputs.
The Strategic Implications: Democratizing High-Quality Diligence
The significantly reduced price point offered by DiligenceSquared carries profound strategic implications for the private equity industry. 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." This accessibility means PE firms are now far more willing to engage DiligenceSquared earlier in the investment process, well before they have developed a high conviction in a particular deal.
Historically, the prohibitive cost of external commercial due diligence meant that such reports were commissioned only for late-stage deals where the likelihood of closing was already high. This often left earlier-stage evaluations or smaller deals reliant on internal resources, which might lack the specialized depth or breadth of external consultants. With DiligenceSquared, firms can now afford to conduct rigorous commercial diligence on a wider array of potential targets, or at earlier stages of evaluation, enabling better-informed decisions, potentially reducing the risk of costly missteps, and accelerating deal flow.
This shift could democratize access to high-quality market intelligence, leveling the playing field for smaller and mid-market private equity funds that might have previously found the costs of top-tier consulting prohibitive. It also allows larger firms to deploy their capital more efficiently, reserving the highest-cost human consultant engagement for the most complex, bespoke strategic advisory tasks, rather than routine data collection and initial synthesis.
The Evolving Competitive Landscape
DiligenceSquared is not alone in its mission to disrupt the traditional diligence market. The burgeoning field of AI in professional services has attracted significant investment and innovation. A notable competitor, Bridgetown Research, also focused on accelerating due diligence with AI, secured a substantial $19 million Series A funding round in February 2026, co-led by prominent venture capital firms Accel and Lightspeed. This indicates a growing recognition within the venture capital community of the immense market opportunity for AI-driven solutions in M&A and private equity.
The competition underscores the validation of the problem DiligenceSquared is addressing. As more players enter the market, innovation is likely to accelerate, leading to more sophisticated AI tools and more refined service offerings. The key for DiligenceSquared will be to maintain its competitive edge through continuous technological development, expanding its service capabilities, and leveraging its founders’ deep industry networks and credibility.
Broader Impact and Future Outlook
The rise of companies like DiligenceSquared represents a broader trend of artificial intelligence permeating and transforming professional services. From legal tech leveraging AI for contract review to AI-powered financial analysis platforms, the efficiency gains and cost reductions offered by intelligent automation are reshaping industries. In consulting, this transformation is likely to lead to a bifurcation of services: highly strategic, bespoke advisory work will remain the domain of senior human consultants, while data-intensive, repeatable analysis and research will increasingly be handled by AI platforms.
For the traditional consulting giants, this presents both a challenge and an opportunity. While they may see a portion of their commercial due diligence revenue streams challenged, it also frees up their most experienced consultants to focus on higher-value strategic engagements, potentially enhancing their overall impact and profitability in other areas. Many of these firms are already investing heavily in their own AI capabilities, recognizing the imperative to adapt.
Looking ahead, DiligenceSquared’s trajectory will depend on several factors: its ability to scale its AI infrastructure, maintain the high quality of its outputs as demand grows, and potentially expand its offerings beyond commercial due diligence to other areas of M&A scrutiny that can benefit from AI automation, such as operational or technical diligence. The startup’s presence at industry events, such as the TechCrunch event in San Francisco from October 13-15, 2026, will be crucial for visibility, networking, and attracting further talent and investment.
The $5 million seed round, spearheaded by an experienced venture capitalist like Damir Becirovic, provides DiligenceSquared with the capital to accelerate its growth, refine its technology, and solidify its position in a rapidly evolving market. The company stands at the forefront of a movement that promises to make the often opaque and expensive world of private equity due diligence more transparent, efficient, and accessible, ultimately influencing the pace and quality of investment decisions across the globe.
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