Preparing your business for technical due diligence

The phrase that catches founders off guard

Somewhere in the middle of an investment round or an acquisition conversation, someone on the other side says the words “technical due diligence,” and a founder who’s been entirely focused on the commercial side of the deal suddenly realises they have no idea what’s about to happen, or how much it could affect the outcome.

Technical due diligence (often shortened to “technical DD”) is the process where the investor or buyer brings in someone, often an experienced CTO or engineer working independently, to look properly at your technology: the code, the architecture, the team, the processes around how things get built and maintained. They’re checking whether what you’ve built is actually sound, and whether it can support the growth or the price tag being discussed.

What they’re actually looking for

It’s less of an exam and more of a risk assessment. The people conducting it aren’t trying to catch you out, they’re trying to answer a fairly simple question on behalf of whoever’s paying them: is this business’s technology an asset, or a liability wearing an asset’s clothes?

They’ll typically look at things like:

• How the codebase is structured, and how much technical debt (shortcuts that were fine at the time but now slow things down) has built up
• Whether the system can handle significantly more users or transactions than it does today
• How dependent the business is on one or two individuals who hold all the critical knowledge
• Security practices, and how data is handled
• How decisions get made, documented, and reviewed
• Whether the team has the skills and structure to keep building after the deal closes

Why this catches so many businesses out

Most small and growing businesses have never been looked at this closely before. Things that felt like reasonable, pragmatic choices under pressure, a bit of undocumented code here, one person who “just knows how it all works” there, suddenly get written up in a report that an investor or buyer reads before deciding whether to proceed, and at what price.

The uncomfortable truth is that technical DD findings can genuinely move the number on the table. A serious enough concern can delay a deal, reduce a valuation, or in the worst cases, kill it entirely.

How to actually prepare

The good news is that most of what gets flagged in technical due diligence is fixable, or at least explainable, if you know it’s coming.

• Get an honest internal picture first. Before anyone external looks, find out for yourself where the weak points are. It’s much better to walk into the process already knowing your answers than to be surprised alongside the investor.
• Sort out the “bus factor” problem. If critical knowledge sits in one person’s head, start documenting it now. This is one of the most common findings, and one of the easiest to visibly improve in a short space of time.
• Tidy up security basics. Access controls, how customer data is stored, whether old accounts and permissions have been cleaned up. These are quick wins that reviewers specifically check.
• Be honest about known problems, with a plan attached. Reviewers aren’t expecting perfection. A business that says “yes, we know this area needs work, and here’s what we’re doing about it” reads as far more trustworthy than one that pretends everything’s fine.
• Get a second pair of experienced eyes before the real one arrives. A dry run, from someone who’s been through this process before, is one of the highest-value things you can do in the run-up to a deal.

How long this actually takes

If a deal is already on the table, you may only have weeks, not months, to get ready, which is exactly why it’s worth starting the internal review the moment technical DD is mentioned as a possibility, rather than waiting for it to be formally confirmed. Businesses that start preparing early tend to walk into the process calm and organised. Businesses that start the week the reviewer is appointed tend to spend the whole process reacting, which rarely produces the calm, considered answers a reviewer is looking for.

The bigger picture

Technical due diligence isn’t really about your code being perfect. It’s about whether the person reviewing it comes away believing your business is being run competently, and that whatever they find is understood and managed rather than hidden or ignored. Walking in prepared changes that impression more than almost anything else you can do in the weeks before the process starts.