What technical due diligence covers - and why it matters before you invest

If you are preparing to raise funding, take on investment, or sell your business, there is a good chance someone is going to look under the bonnet of your technology. That process is called technical due diligence, and in my experience, it is the single most misunderstood part of the investment process for non-technical founders.

I have conducted technical due diligence assessments for investors, acquirers, and founders across a range of industries. One engagement for a global humanitarian organisation revealed that 60% of a vendor's proposed modernisation costs were actually the vendor's own technical debt - something that would never have surfaced without an independent review.

This guide explains what technical due diligence actually involves, what assessors are looking for, and what you can do to prepare. I have written it specifically for founders who do not come from a technical background, because you are the people who stand to gain - or lose - the most from this process.

What is technical due diligence?

Technical due diligence is a structured, independent assessment of a company's technology assets. It evaluates whether the technology behind a product or service is sound, scalable, secure, and capable of supporting the business's future plans.

For investors, it answers a simple question: is this technology worth what we are paying for it?

For founders, it answers an equally important one: are there hidden problems that could derail our growth, our fundraise, or a future exit?

The assessment typically covers seven core areas, which I will walk through in detail below. A thorough review takes between one and three weeks depending on the size and complexity of the systems involved.

The seven areas of a technical due diligence assessment

1. Architecture and technical design

This is the foundation of the entire assessment. I look at how the system is structured - the overall architecture, how different components interact, and whether the technical choices align with the business's actual needs.

What I am checking:

Is the architecture documented and up to date?
Are system components clearly defined with distinct responsibilities?
Are the technology choices appropriate, or are they over-engineered for the current stage?
Is there a clear data flow between components?
Are architecture decisions recorded somewhere, or does knowledge live only in people's heads?

Founders often assume this is about whether the technology is "good" in some abstract sense. It is not. It is about whether the architecture can support where the business is going. A system that works perfectly for 100 users but falls over at 10,000 is a material risk for an investor backing your growth.

2. Code quality and technical debt

Every codebase accumulates technical debt over time. That is normal. What matters is whether it is understood, tracked, and managed, or whether it is quietly compounding beneath the surface.

I review code samples, look at coding standards, check whether code review processes exist, and assess the overall health of the codebase. I also look at documentation - not because investors will read it, but because its absence tells me a lot about the team's practices.

Technical debt is not inherently bad. Choosing speed over perfection in the early stages is a rational decision. The red flag is when a team cannot tell you where their debt is, or when "nobody touches" certain parts of the system because they are too fragile.

3. Security posture

Security is non-negotiable. A breach can destroy customer trust, trigger regulatory action, and wipe out a company's value overnight.

I assess:

Authentication and authorisation controls
Input validation and protection against common attack vectors
Encryption of sensitive data (at rest and in transit)
Whether secrets are stored securely or hard-coded in repositories
Vulnerability scanning practices
GDPR compliance measures and data retention policies

For UK businesses, GDPR compliance is particularly critical. Investors need to know that the company can demonstrate a lawful basis for data processing, respond to subject access requests, and fulfil the right to deletion. These are not theoretical concerns - they are legal obligations with real financial penalties.

4. Scalability analysis

Investors are not investing in what your technology does today. They are investing in what it needs to do in two, three, or five years.

Scalability analysis examines whether the system can handle growth - and at what cost. I look at current load handling, database query performance, caching strategies, and whether there is a defined approach for scaling beyond current capacity.

The key question is not "can it scale?" but "what will it cost to scale, and are there any architectural constraints that would require a significant rewrite?" A system that requires a fundamental rebuild to handle 10x growth is a very different investment proposition from one that needs additional infrastructure spend.

5. Testing and quality assurance

Testing tells you how confident a team is in their own code. If there are no automated tests, or tests exist but nobody runs them, that is a significant warning sign.

I look at:

Whether unit tests cover core business logic
Whether integration and end-to-end tests exist for critical paths
Whether test coverage is measured and tracked
Whether tests run automatically as part of the deployment process
Whether there is a defined QA process and how bugs are handled

Lack of testing does not necessarily mean the code is bad. But it does mean that every change carries more risk, every deployment is a gamble, and the team's ability to move quickly and safely is compromised.

6. Team capability and organisation

This is often the area that surprises founders the most. Technical due diligence is not just about code - it is about the people who write and maintain that code.

I assess:

Whether the team size is appropriate for the codebase
Key person dependencies (the "bus factor" - what happens if a critical team member leaves?)
How knowledge is distributed across the team
Whether the team has relevant domain expertise
Development processes - do they follow agile practices, hold retrospectives, track velocity?

I have written before about the hero developer anti-pattern - when your best engineer is also your biggest risk because they hold all the knowledge. This comes up frequently in due diligence assessments, and it is a genuine concern for investors evaluating long-term viability.

7. Intellectual property and licensing

This is the area most likely to produce a genuine deal-breaker. IP issues can range from unclear code ownership (common when contractors have been used without proper agreements) to problematic open-source licence usage that could expose the business to legal risk.

I check:

Code ownership and assignment agreements
Open-source licence compliance
Third-party dependency risks and costs
Whether critical functionality depends on services that could be withdrawn or repriced

If a founder tells me "we own everything," my next question is always: can you prove it? Verbal assurances are not sufficient when millions of pounds are at stake.

What technical due diligence actually looks like in practice

The process typically follows six steps:

Preparation - Scoping the assessment, signing NDAs, agreeing access requirements
Kick-off meeting - Aligning on objectives and understanding the business context
Documentation and code review - Systematic review of repositories, architecture documentation, and operational data
Team interviews - Structured conversations with the CTO, lead engineers, and key technical staff
Interim findings - Sharing preliminary observations and clarifying questions
Final report - Comprehensive written report with risk scoring, detailed findings, and a remediation roadmap

For investors, the deliverable is typically a 40-60 page report with an executive summary, risk matrix using RAG (red, amber, green) status, domain-by-domain findings, and a clear recommendation. For founders preparing for investment, the same process applies but the focus shifts to identifying and fixing issues before they become negotiation points.

Why it matters before you invest (or raise investment)

According to KPMG, 62% of deals fail to hit their financial targets, and poor due diligence is cited as a primary cause. Technical problems discovered after completion are vastly more expensive to address than those identified beforehand.

For investors, technical due diligence provides:

Valuation confidence - Is the technology worth what you are paying?
Risk identification - Are there deal-breakers hiding in the codebase?
Integration planning - What will it cost to bring this technology into your portfolio?
Negotiation leverage - Evidence-based grounds for price adjustment

For founders, preparing for technical due diligence delivers its own value:

Stronger negotiating position - Demonstrating technology maturity builds investor confidence
Faster deal closure - Clean technology due diligence removes friction from the process
Internal clarity - The preparation process itself often reveals issues worth addressing regardless of the investment outcome

In the current UK investment landscape, where Seed to Series A funding has become far more competitive, investors expect founders to demonstrate maturity in how they build, secure, and scale their product. Technical due diligence has moved from a nice-to-have to a decisive filter during early-stage investment rounds.

How to prepare: the practical steps

If you are six to twelve months away from a fundraise or exit, here is what I would recommend:

Start with a self-assessment. I have put together a comprehensive 96-item Technical Due Diligence Checklist that covers all seven assessment areas. It uses the same framework that professional investors and acquirers use. Work through it honestly with your technical team, and you will quickly see where the gaps are.

Fix the easy wins first. Missing documentation, outdated dependencies, and secrets stored in code repositories are all quick fixes that make a disproportionate difference to how your technology is perceived.

Address key person dependencies. If only one person understands a critical part of your system, that is a risk you need to mitigate. Document processes, share knowledge, and ensure your team's bus factor is greater than one.

Get your IP house in order. Make sure all contractor and employee agreements include proper IP assignment clauses. Audit your open-source licence usage. If you are not sure whether your licensing is compliant, get specialist advice now rather than discovering a problem during the deal.

Consider an independent health check. Having an external assessment before investors conduct theirs gives you the opportunity to identify and address issues on your terms. It is considerably less stressful than discovering problems during a live transaction.

Frequently asked questions

How long does technical due diligence take?

A thorough assessment typically takes one to three weeks of active work, depending on system complexity and the level of access provided. The elapsed time is usually two to four weeks to allow for scheduling interviews and producing the final report. For early-stage companies with simpler systems, a focused red flags review can be completed in three to five days.

How much does technical due diligence cost?

Costs vary significantly depending on scope and context. In the UK, a focused health check starts from around 3,500 pounds, while a comprehensive investor assessment for a Series A or Series B round typically runs between 8,000 and 15,000 pounds. Full M&A due diligence, which includes integration planning, ranges from 15,000 to 25,000 pounds. The cost should be weighed against the value at risk - when millions of pounds are at stake, the assessment fee is negligible.

Can I do technical due diligence myself as a non-technical founder?

You can use a structured checklist to conduct a preliminary self-assessment, and I would encourage it. However, for high-stakes transactions, an independent external assessment is expected by most serious investors. External consultants bring objectivity, cross-industry benchmarking, and the ability to identify issues that internal teams may overlook or have normalised. Self-assessment is a valuable preparation step, not a replacement for professional review.

What are the most common problems found during technical due diligence?

The issues I encounter most frequently are: key person dependencies where critical knowledge lives in a single team member's head; undocumented or poorly documented architecture; technical debt that has been ignored rather than managed; inadequate testing coverage; and security practices that have not kept pace with the system's growth. None of these are necessarily deal-breakers on their own, but they all represent risk that investors will want to understand and price in.

Should I get a technical due diligence before approaching investors?

Yes, if you have the time. Running an independent assessment six to twelve months before a fundraise gives you the opportunity to address any issues on your own terms. It also demonstrates maturity and preparedness to potential investors. Think of it as the technology equivalent of getting your accounts audited before a sale - it builds confidence and reduces friction in the deal process.

Next steps

If you are preparing for investment, acquisition, or simply want to understand the true state of your technology, I can help. I offer technical due diligence assessments for investors, acquirers, and founders across the UK.

Start with the free Technical Due Diligence Checklist to benchmark where you stand, and get in touch when you are ready to discuss a formal assessment.