Tech Due Diligence

Tech Due Diligence is the structured evaluation of a company’s technology, data, and product capabilities to assess risks, scalability, and alignment with business strategy. Investors, acquirers, or boards commission these services before funding, acquisition, or major transformation to ensure the company’s tech stack, processes, and teams can support future growth.

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Core Areas of Tech DD

1. Technology Architecture & Scalability
   • Assess the software architecture, infrastructure, and design principles.
   • Identify whether the tech stack can scale with growth (users, geographies, data volume).
   • Example: A SaaS startup’s monolithic codebase might limit scaling → recommendation: microservices transition.
2. Code Quality & Maintainability
   • Review codebase, technical debt, documentation, test coverage, and CI/CD practices.
   • Tools: Static code analysis, peer reviews, quality benchmarks.
   • Example: Discovering high dependency on a few developers with tribal knowledge = risk flag.
3. Data & Analytics
   • Evaluate data architecture, pipelines, governance, and security.
   • Ensure compliance with GDPR, CCPA, HIPAA, etc.
   • Example: PE firm investing in a healthtech startup → flag on incomplete HIPAA compliance.
4. Cybersecurity & Risk
   • Security posture assessment: vulnerability scans, pen tests, access controls, encryption.
   • Business continuity and disaster recovery planning.
   • Example: Target (2013) breach traced to vendor → shows why vendor ecosystem risk is critical.
5. Product & Roadmap
   • Validate product-market fit, backlog discipline, release management, innovation pipeline.
   • Benchmark roadmap realism against team capacity and market trends.
   • Example: A startup claiming AI capabilities but only using basic ML APIs → misalignment risk.
6. Team & Organization
   • Assess skills, org structure, leadership, and hiring practices.
   • Identify key-person risk (overreliance on 1–2 engineers).
   • Example: Acquisition of a startup stalled because CTO owned all IP in personal repos.
7. Processes & Governance
   • Evaluate Agile/DevOps maturity, change management, QA/testing processes, release cadence.
   • Example: Company deploying once every 6 months = slower adaptability vs. competitor deploying weekly.
8. Cost & Efficiency
   • Assess cloud spend, licensing, infra utilization, vendor contracts.
   • Benchmark efficiency vs. peers.

Types of Tech DD Engagements

• Investor Tech DD – VC/PE/strategic acquirer validates scalability, risks, and exit potential.
• Vendor Tech DD – Companies preparing for sale proactively review their tech stack (“sell-side DD”).
• Post-Acquisition Tech Assessment – Ensure integration readiness and value capture.
• Operational Tech DD – Boards/CEOs use it to benchmark IT/tech org performance.

Benefits

• Risk Identification – Flagging critical gaps before capital deployment.
• Valuation Support – Informing pricing and terms of investment/acquisition.
• Integration Planning – Understanding how easily systems can merge.
• Strategic Insight – Highlighting opportunities for improvement and competitive edge.

Typical Deliverables

• Executive summary with red/yellow/green risk ratings.
• Detailed analysis of architecture, product, security, and team.
• Gap remediation plan with cost/timeline estimates.
• Recommendation on investment decision, deal structuring, or integration.

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