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Startup Guide • Technical DD
Technical due diligence can make or break a funding round or acquisition. Understanding what investors assess — and preparing thoroughly before they look — is the difference between closing the deal and losing it on technical risk.
A comprehensive review covers six key areas. This is exactly what investors and acquirers assess — and what founders should prepare before a funding round.
Technical due diligence (Tech DD) is a structured review of a startup's technology, engineering team, and development practices conducted by an investor, acquirer, or independent advisor before a funding round or acquisition. It assesses whether the technology can support the business's growth plans, identifies technical risks that could affect valuation, and validates claims made in the pitch deck.
Investors typically assess seven areas: (1) Architecture and scalability — can the system handle 10x growth without a full rebuild? (2) Code quality — is the codebase maintainable and well-tested? (3) Security and compliance — are user data and financial transactions properly protected? (4) Technical debt — how much legacy code will slow future development? (5) Team capability — does the engineering team have the skills to execute the roadmap? (6) IP and open-source compliance — does the company own its technology? (7) Infrastructure and DevOps — is the deployment process reliable and cost-efficient?
A thorough technical due diligence engagement typically takes 2-4 weeks. This includes: initial document and architecture review (Week 1), code review and security assessment (Week 1-2), team interviews and process evaluation (Week 2-3), and final report preparation with risk ratings and recommendations (Week 3-4). Some investors request an accelerated 1-week "red flag" review before deeper DD, which is possible for focused assessments.
Preparation significantly improves outcomes. Before your DD process begins: (1) Document your architecture with diagrams and decision records, (2) Clean up your code repository and remove unused branches, (3) Ensure your test coverage is reasonable (>60% for critical paths), (4) Review and address known security vulnerabilities, (5) Prepare an honest technical debt register with mitigation plans, (6) Have your engineering team briefed on what to expect, (7) Consider engaging an independent technical advisor to conduct a pre-DD review.
I conduct independent pre-DD reviews for Southeast Asian startups — helping founders identify and address risks before investors find them.
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