Technical Due Diligence: What Investors Actually Look For

I've been on both sides of technical due diligence — preparing companies for it and conducting it on behalf of investors. Here's what I've learned: most founders prepare for the wrong things.

They worry about whether their code is "clean enough." They polish documentation that nobody reads. They prepare slides about their tech stack choices.

Meanwhile, investors are asking much simpler questions: Does this thing actually work? Can it scale? And what will break if it does?

What technical due diligence actually is

Technical due diligence is an investor's way of assessing whether the technology behind a business is an asset or a liability.

It's not a code review. It's not a security audit. It's a business assessment through a technical lens.

The question isn't "is this good code?" The question is "can this technology support the growth that the business plan claims?"

Most due diligence processes take 1-3 weeks and involve reviewing architecture, infrastructure, team capability, development practices, and technical debt. The output is a risk assessment — not a grade.

The five things investors actually evaluate

1. Architecture and scalability

This is the first thing a technical evaluator looks at while assessing a product — not because architecture is the most important thing, but because it reveals the most about how technical decisions have been made.

What they're checking:

• Can the system handle 10x current load? Not theoretically — practically. Where are the bottlenecks? Database? API? Third-party dependencies?
• How coupled is the system? Can you change the payment provider without rewriting the checkout? Can you add a new market without duplicating the entire app?
• Was the architecture designed or did it happen? There's a big difference between "we chose a monolith because it was right for our stage" and "we started building and this is what we ended up with."

The red flag isn't having a monolith. It's not knowing why you have one.

2. Technical debt and velocity

Every startup has technical debt. Investors know that. What matters is whether the team knows where it is, how it affects velocity, and whether there's a plan.

What they look for:

• Is the team slowing down? If feature velocity is declining sprint over sprint, that usually points to accumulating debt that's not being addressed.
• Where are the known risks? Every system has parts that developers are afraid to touch. The question is whether leadership knows which parts those are.
• Is there a realistic plan? Not a fantasy roadmap. A realistic plan that balances new features with paying down debt. "We'll fix it later" is the most expensive sentence in startups.

3. Team and knowledge distribution

Investors evaluate people as much as they evaluate code. A system built by one brilliant developer who left six months ago is a very different risk profile than a system maintained by a stable team.

What they look at:

• Bus factor. How many people would need to leave before critical parts of the system become unmaintainable? If the answer is one, that's a risk.
• Documentation culture. Not whether there's a wiki with 200 pages. Whether a new developer can understand the deployment process and key architectural decisions without asking three people.
• Hiring pipeline. Is the current tech stack something you can hire for? If your team built everything in an obscure framework, scaling the team becomes part of the technical risk.

4. Security and data handling

This doesn't have to be enterprise-grade. But it does have to be responsible.

Minimum expectations:

• Authentication isn't homegrown. Using a proven auth solution (Auth0, Clerk, Firebase Auth, etc.) rather than rolling your own.
• Data is encrypted in transit and at rest. HTTPS everywhere. Database encryption. Sensitive data not stored in plaintext.
• There's an incident response process. Even if it's a one-page document. What happens when something goes wrong? Who gets notified? What's the escalation path?
• Compliance awareness. If you handle EU data, you should know what GDPR requires. If you handle payments, PCI-DSS basics should be in place. Investors aren't expecting perfection — they're expecting awareness.

5. Infrastructure and deployment

How the product gets from code to production tells investors a lot about engineering maturity.

What they evaluate:

• Deployment frequency and process. Teams that deploy weekly or more frequently with a reliable process are lower risk than teams that deploy monthly with a manual checklist and a prayer.
• Monitoring and observability. Can you tell when something is broken before a user reports it? Basic uptime monitoring, error tracking, and performance dashboards are the minimum.
• Disaster recovery. If the database crashes, what happens? If the primary server goes down, what happens? The answer doesn't need to be "we have a multi-region failover." It needs to be "we have backups, we've tested them, and we know the recovery time."

Common red flags that kill deals

In my experience, these are the findings that make investors hesitate or walk away:

• No version control history. Yes, this still happens. No git history means no visibility into how the product was built.
• Single point of failure — human. One developer owns everything. No documentation. No one else understands the system. The investor is essentially funding a dependency on that person.
• No staging environment. Testing in production means every deployment is a risk event. It signals that the team hasn't invested in basic engineering hygiene.
• Vendor lock-in with no exit plan. Building entirely on one platform with no abstraction layer means switching costs grow with every feature. Investors see this as a future liability.
• Misleading metrics. Reporting "99.9% uptime" when there's no monitoring is worse than reporting honest numbers. If the evaluator finds that the metrics aren't real, trust collapses.

How to prepare without overthinking it

You don't need to fix everything before due diligence. You need to show that you understand what you've built, what the risks are, and what the plan is.

Create an architecture overview. One page. How the system works. Major components. External dependencies. Data flow. This doesn't need to be beautiful — it needs to be accurate.

Document your known technical debt. Write down the things your developers complain about. The parts that are fragile. The shortcuts you took and why. Investors respect honesty about trade-offs far more than a polished facade.

Show your deployment pipeline. If you have CI/CD, show it. If you don't, explain how you deploy and what your plan is to automate it. Having a plan matters more than having perfection.

Know your numbers. Response times. Error rates. Deployment frequency. Active users vs. capacity headroom. If you can't answer basic questions about your system's health, that's a signal.

Be honest about what you'd do differently. Every founder who's been building for more than six months would make different technical choices if they started over. Acknowledging that shows maturity. Hiding it shows risk.

The one thing that matters most

Technical due diligence isn't really about technology. It's about trust.

Investors want to know that the founding team understands the technical risks they're carrying, has a plan to manage them, and is honest about what they know and what they don't.

The companies that pass due diligence easily aren't the ones with the cleanest code. They're the ones where leadership can explain what they built, why they built it that way, and what happens next — without needing a slide deck.

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Preparing for technical due diligence or evaluating a technical investment? I can help — I've done this for both founders and investors.