Smart investors know that they don’t know what they don’t know and work with companies like ours to help shed light on the technical aspects of their potential investments. Forbes even suggests that technical due diligence is the second most important thing to do during due diligence.
So what is being looked for?
There are a few things that tend to be consistent no matter the investor or type of business:
- What are the strengths and weaknesses of the existing team?
- What technical roles will the team need as the company continues to grow?
- Does the company have appropriate ownership of their “special sauce”?
- Has the team implemented appropriate processes for things like project management, source control, and developer churn?
One of the most important things for us to do with these technical due diligence audits is not actually talking with the technical people—it’s talking with the investor to understand what they are looking to better understand, and discussing with the company what their 3, 5 and 10 years plans are currently.
What are we delivering?
Generally speaking, technical due diligence is not a code review. A code review can certainly be a part of technical due diligence, but for the most part, it focuses on the team’s abilities, overall architecture, and any liabilities that might be there.
As we talk with members of the team, we try to understand the finer details of an application, how its various systems work, and what trials and tribulations the developers went through while building it.
Ultimately, what we try to deliver is an overview of what we would do if we were brought in as CTO tomorrow, to get the company to where they want it to be in 3, 5, or 10 years. Typically this will include things like:
- Opinions on existing team members’ strengths and weaknesses
- Product roadmap defining high-level features and timelines
- A hardware and software technology summary
- Identifying key risks related to technology
- Recommended actions to reduce risk
Whether you’re with an investment firm, or you’re in the process of raising a round and wanted better understand what to expect, we would love to talk about how we could help you with your next deal.