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Technical Due Diligence: What Investors Really Look For

You've nailed the pitch deck. The partner meeting went well. Now they want to "look under the bonnet." Here's what they're actually checking and how to make sure you pass.

Mike Tempest • 14 min read •

Most founders spend months perfecting their pitch deck, financial model, and go-to-market narrative. Then an investor says "we'd like to do a technical review" and suddenly the mood changes.

Technical due diligence shouldn't be terrifying. But it does require preparation. Having been on both sides of this process -- as a CTO whose companies have gone through due diligence, and as a Fractional CPTO helping founders prepare for it -- I can tell you that the gap between "well-prepared" and "winging it" is enormous.

Here's what investors actually evaluate, the red flags that kill deals, and how to prepare without burning three months of engineering time.

Why Technical Due Diligence Matters More Than You Think

At seed stage, investors are betting on the team and the market. By Series A, they're betting on execution -- and your technology is how you execute.

Technical due diligence isn't just about checking if your code is clean. Investors are asking a deeper question: can this technology scale to justify a 10x return on our investment?

67%

of Series A investors conduct some form of technical assessment before closing

23%

of deals see valuation adjustments based on technical findings

1 in 8

deals fall through entirely due to technical red flags

Sources: Atomico State of European Tech 2025, various VC technical review firms

The 7 Areas Investors Evaluate

Every technical reviewer has their own framework, but they all cover roughly the same ground. Here's what to expect.

1

Architecture and Scalability

This is the big one. Investors want to know: can your system handle 10x the current load? 100x? They're not expecting you to be there already, but they want to see a credible path.

What they look for:

  • + Clear separation of concerns (not a monolith that does everything)
  • + Database design that won't collapse under load
  • + Horizontal scaling capability (can you add more servers, not just bigger ones?)
  • + Sensible use of third-party services (not reinventing everything, but not over-dependent either)

What kills deals:

A single database that handles everything, with no sharding strategy or read replicas. Hardcoded configuration that requires code deployments to change. Architecture diagrams that look like they were drawn five minutes before the meeting (because they were).

2

Code Quality and Engineering Practices

Investors aren't reading your code line by line. But they (or their technical reviewer) will look at patterns, testing coverage, and whether your team follows professional engineering practices.

What they look for:

  • + Automated testing (unit, integration, end-to-end) with reasonable coverage
  • + Code review process (pull requests, not pushing straight to main)
  • + CI/CD pipeline that builds, tests, and deploys reliably
  • + Consistent coding standards (linting, formatting, naming conventions)

You don't need 90% test coverage. In fact, that would be suspicious at a seed-stage startup. What matters is that testing exists where it counts: critical business logic, payment flows, data integrity.

3

Security and Data Protection

Post-GDPR, this is non-negotiable. A security breach at a portfolio company reflects on the investor. They want to know you take it seriously. If you are building in a regulated industry, security expectations are even higher.

What they look for:

  • + Authentication and authorisation done properly (not rolled your own crypto)
  • + Data encryption at rest and in transit
  • + GDPR compliance basics (data processing records, deletion capability, consent management)
  • + Secrets management (not hardcoded API keys in the repository)

What kills deals:

Passwords stored in plain text. API keys committed to a public GitHub repository. No ability to delete user data on request. "We'll sort out security after the raise" as an answer to any security question.

4

Team and Technical Leadership

The code matters less than the people who wrote it and the people who will write the next version. Investors assess whether your engineering team can execute on the roadmap.

What they look for:

  • + Technical leadership that can articulate trade-offs and decisions clearly
  • + A team that understands why things were built a certain way (not just how)
  • + Hiring plan that makes sense for the roadmap
  • + Low key-person risk (not one developer who knows everything)

This is where non-technical founders often struggle. If nobody on your team can explain your architecture to an investor's technical advisor, that's a problem. A fractional CTO can bridge this gap during the raise.

5

Infrastructure and DevOps

How you deploy, monitor, and recover from failures tells investors a lot about your engineering maturity.

What they look for:

  • + Infrastructure as code (Terraform, CloudFormation, Pulumi -- not clicking through the AWS console)
  • + Monitoring and alerting (you should know when something breaks before your customers do)
  • + Disaster recovery plan (even a simple one)
  • + Deployment frequency (daily or weekly is healthy; monthly is concerning)
6

Technical Debt Awareness

Every startup has technical debt. Investors know this. What they want to see is that you know where it is, why it exists, and what you plan to do about it.

The worst answer to "what technical debt do you have?" is "none." That means either you don't know (bad) or you're not being honest (worse). The best answer is a prioritised list with a clear plan for addressing the items that matter.

7

IP and Defensibility

Is the technology a genuine competitive advantage, or could a well-funded competitor replicate it in six months?

What they look for:

  • + Proprietary algorithms or data that create a moat
  • + Clean IP ownership (all code written by employees or properly contracted)
  • + Open-source licence compliance (no GPL code in proprietary products without understanding the implications)
  • + Network effects or data advantages that compound over time

The 10 Red Flags That Kill Deals

Based on conversations with VCs and technical due diligence firms, these are the findings that most commonly derail a raise:

1. Single point of failure

One developer who built everything and is the only one who understands it

2. No version control hygiene

Pushing directly to main, no code reviews, no branch strategy

3. Zero automated testing

Not even basic smoke tests on critical paths

4. Security fundamentals missing

Plain text passwords, hardcoded secrets, no HTTPS

5. No monitoring

Customers report outages before the team knows

6. Outsourced core IP

Critical technology built by an agency with unclear IP ownership

7. No deployment pipeline

Manual deployments via FTP or SSH that take hours

8. Architecture fiction

Architecture diagrams that don't match reality

9. Licence violations

GPL-licensed code in proprietary products without compliance

10. "We'll fix it after the raise"

Using funding as an excuse to defer every technical problem

The 30-Day Preparation Checklist

You don't need to rebuild your product. You need to prepare your story and fix the obvious gaps. Here's what to do in the month before due diligence starts.

W1

Week 1: Document What Exists

  • Create an up-to-date architecture diagram (honest, not aspirational)
  • Document your tech stack and why each technology was chosen
  • List all third-party dependencies and their costs
  • Write down your deployment process step by step
  • Document known technical debt with your plan for each item
W2

Week 2: Fix the Obvious

  • Remove any hardcoded secrets from your repository (and rotate them)
  • Set up basic monitoring if you don't have it (even free-tier Datadog or Sentry)
  • Ensure your CI/CD pipeline runs and passes
  • Add tests to your most critical business logic (payment flows, auth, core algorithms)
  • Check that user data deletion works (GDPR subject access requests)
W3

Week 3: Prepare the Narrative

  • Brief your technical team on what to expect (and what NOT to say)
  • Prepare answers for the hard questions (see below)
  • Create a technical roadmap that aligns with your business plan
  • Document your engineering hiring plan for post-raise
  • Run a mock due diligence session with a technical advisor (a technical audit can help here)
W4

Week 4: Stress Test

  • Run a basic load test on your critical endpoints
  • Verify your backup and recovery process actually works
  • Check that your staging environment mirrors production
  • Review open-source licence compliance
  • Ensure all IP assignments and contractor agreements are in order

The Hard Questions You'll Be Asked

Prepare answers for these. Every technical reviewer asks some variation:

"Walk me through what happens when a user does [core action]."

They're testing whether you understand your own system end to end. Trace the request from the browser through every service, database call, and external API. If you can't do this fluently, practise until you can.

"What happens if your database goes down at 3am?"

They want to know about resilience, monitoring, on-call, and recovery. The right answer isn't "it won't" (it will). The right answer is "here's how we detect it, here's who gets paged, here's our recovery process, and here's our RPO/RTO."

"What would you do differently if you started again today?"

This tests self-awareness and honesty. Every founder has things they'd change. Saying "nothing" is a red flag. Listing everything is also a red flag. Pick 2-3 genuine trade-offs you made for speed, and explain how you'd address them post-raise.

"How do you handle [10x your current scale]?"

They're not expecting you to handle it today. They want to see that you've thought about it and have a credible plan. "We'd need to shard the database and add a caching layer" is fine. "We'll cross that bridge when we come to it" is not.

"What's your biggest technical risk right now?"

Honesty wins here. Every company has technical risks. Name yours, explain the mitigation plan, and show that you're managing them proactively rather than ignoring them.

For Non-Technical Founders

If you're a non-technical founder, technical due diligence can feel like an exam in a subject you never studied. Here's the truth: you don't need to become technical, but you need someone technical in your corner.

Options, from most to least effective:

Best: A technical co-founder or CTO who can own the conversation and answer deep questions with authority
Good: A fractional CTO who can prepare you, run mock sessions, and sit in on technical conversations
OK: A senior engineer on your team who understands the full architecture and can articulate trade-offs
Bad: Trying to wing it with the agency that built your MVP, or hoping the investor won't ask hard questions

The Bottom Line

Technical due diligence isn't about having perfect code. It's about demonstrating that you understand your technology, know its limitations, and have a credible plan for scaling it. Investors are backing your ability to execute, not your ability to write elegant code.

The founders who pass technical due diligence comfortably are the ones who are honest about trade-offs, prepared with documentation, and have thought about what comes after the cheque clears. Read more about the Series A technical debt trap and how business-first engineering helps you prioritise what matters.

Prepare early, be honest, and make sure someone on your team can tell the story of your technology with confidence. The rest is execution.

Related Reading

Technical Due Diligence for Investors

The investor's perspective on evaluating startup technology — what they look for and what they ignore.

The Series A Technical Debt Trap

How to prioritise technical debt after raising, so it does not block your growth targets.

The First 90 Days After Raising

What to focus on technically in the critical period after closing your round.

Fractional CTO / CPtO Services

How a fractional CTO helps you prepare for and pass technical due diligence.

Preparing for technical due diligence?

I help founders prepare for and pass technical due diligence. From mock reviews to full technical documentation, I've been through this process from both sides.

Book a Free Day Learn About Fractional CPTO

Frequently Asked Questions

When should we start preparing for technical due diligence?

At least 3 months before you plan to raise. This gives you time to address any red flags, document your architecture, and clean up obvious issues. Starting earlier is always better — some fixes (like removing single points of failure) take time to implement properly.

Do all investors do technical due diligence?

Not all, but the best ones do. Tier 1 VCs almost always conduct some form of technical assessment, either in-house or via specialist firms. Even angels increasingly ask technical questions. If an investor doesn't look under the bonnet at all, that might tell you something about their diligence process.

What if we fail technical due diligence?

Failing outright is rare. More commonly, issues discovered during due diligence lead to a lower valuation, additional conditions, or a request for specific remediation within a timeframe. The worst outcome is a deal falling through entirely, which usually only happens when there are fundamental architectural problems or dishonesty about the tech stack.

Should we hire a CTO before raising our Series A?

Not necessarily. What investors want to see is credible technical leadership, not a specific title. A fractional CTO, a strong technical co-founder, or even a senior engineer who can articulate the technical vision can all work. What won't work is nobody who can answer technical questions.

How long does technical due diligence typically take?

Usually 1 to 3 weeks, depending on the investor and the complexity of your product. Some investors do a quick 2-day review; others bring in specialist firms for a thorough 2-week assessment. Plan for the thorough version and you'll be ready for anything.

Can a fractional CTO help us prepare for technical due diligence?

Yes — this is one of the highest-value engagements for a fractional CTO. They can run a mock due diligence, identify and fix red flags, prepare documentation, and even sit in on investor technical sessions. Having experienced technical leadership during the raise signals maturity to investors.

Mike Tempest

Mike Tempest

Fractional CPTO

Mike has been on both sides of technical due diligence. As Head of Engineering, he scaled RefME from 0 to 2M users, and as CTO turned Risika profitable in 18 months. As a Fractional CPTO, he helps founders prepare their technology stories, fix critical gaps, and pass investor scrutiny with confidence.

Learn more about Mike

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