Technical Due Diligence: Prepare Before You Raise

You have a term sheet conversation coming, and someone has told you "they will send a technical person to look under the hood." Your stomach drops, because you know the codebase has shortcuts, one engineer holds most of the knowledge, and nobody has checked the security settings since launch.

Good news: technical due diligence is rarely a hunt for perfection. Reviewers are mostly trying to answer one question: if we put money in, will this technology stop the company from growing? You can prepare for that in four to six weeks, and most of the work is organising and being honest, not rewriting software.

What diligence reviewers commonly ask

Every reviewer has their own checklist, and depth varies a lot by stage. A seed-stage review may be a one-hour call. A Series B review can involve a few days of code and infrastructure access. These are the themes that come up again and again.

1. Architecture. Can they draw it on one page? Is it understandable, or a tangle? Is the choice of technology sensible for your size? A well-run monolith on managed services is a perfectly good answer. See the boring cloud stack for why.

2. Security basics. Not a penetration test. They look for the obvious: who has admin access, are secrets in the code repository, is multi-factor authentication on, is customer data encrypted, are dependencies kept up to date.

3. Code ownership and IP. Does the company actually own its code? Contractors, agencies and early freelancers are the usual gap. Missing assignment of rights is a legal problem, not a technical one, and it is the one that can stall a closing.

4. Bus factor. If your one senior engineer leaves tomorrow, what happens? Reviewers look for documentation, shared knowledge and no single person holding the keys.

5. Scalability evidence. Not a claim that "it scales", but evidence: load numbers, monitoring graphs, a record of how the system behaved at your last traffic spike.

6. Cost. What does the cloud bill look like, and how does it grow with customers? Unit cost matters more than the total. See cost-aware engineering.

7. Data and compliance. Where does customer data live, who can see it, and do your contracts or industry (health, finance, education) require specific controls?

8. Development process. How does code get from a laptop to production? Is there testing, code review, a way to roll back? How often do you ship?

Fix in 4-6 weeks vs explain honestly

The mistake most founders make is treating every gap equally. Sort them into two buckets.

Fix before the review (cheap, quick, high signal):

Access hygiene: remove former employees and contractors from cloud, code and admin tools. Turn on multi-factor authentication everywhere.
Secrets: move keys and passwords out of the code repository into a proper secrets store, and rotate anything that was ever committed.
Backups: confirm they exist, and do one real restore test. An untested backup is a guess.
IP paperwork: get signed invention-assignment or work-for-hire agreements from every current and past contributor. Ask your lawyer.
One-page architecture diagram and a short "how we deploy" document.
A written list of the top known risks, with owners.
Basic monitoring and alerting on the main user journeys.

Explain honestly (expensive or slow to change):

A messy older part of the codebase. Show the plan to contain it, not a lie that it is fine. Technical debt is a financing decision, and reviewers know that.
No formal security certification yet. Say what you do today and when you plan to start one, if your customers need it.
A small team with uneven skills. Show how you reduce the risk.
Scale limits you have not hit. Name the likely first bottleneck and what it would take to fix. That is the honest version of what breaks as users grow.

Reviewers have seen hundreds of messy systems. What worries them is surprise. A founder who says "here are our five biggest risks and our plan" earns more trust than one whose answers fall apart on the third question.

Example (illustrative): a 15-person SaaS startup preparing a Series A

This is a hypothetical company, not a client. Eight engineers, a Rails monolith on AWS, about 400 paying customers, and a raise planned in eight weeks. The founder asks for a self-audit and finds:

Finding	Bucket	Effort
Two ex-contractors still have production database access	Fix	1 day
Cloud root account has no multi-factor authentication	Fix	1 hour
Database keys committed to the repo two years ago	Fix	2 days
Backups run nightly, never restored	Fix	2 days
One engineer wrote the billing system and is the only person who understands it	Fix partly (document, pair a second engineer)	2 weeks
Contractor-built reporting module has no IP assignment on file	Fix (legal)	1-3 weeks, depends on contractor
Test coverage is thin in older modules	Explain	Ongoing
Cloud bill grew faster than revenue last quarter	Explain, with a cost plan	2 weeks for plan

Total fix effort: roughly four weeks of part-time work across two people. The founder walks into diligence with a one-page architecture diagram, a restore-test log, signed IP agreements, and a short written risk list. The conversation becomes "tell us about your plan" instead of "how did you miss this."

For your CTO or engineers

If you have a technical lead, give them this list to run through:

Repository: branch protection on, required code review, no secrets in history (scan with a secrets scanner), dependency vulnerability scan, a license check for open-source packages (watch for copyleft licences in shipped code).
Infrastructure: infrastructure described as code where possible, separate production and staging, least-privilege roles, logs retained, network access to databases restricted.
Reliability: uptime history, incident log with post-mortems, alert on error rate and latency, and a basic runbook for the three most likely failures.
Scalability evidence: one load test against a realistic scenario, plus the metric graph from your busiest day.
Delivery: deploy frequency, rollback time, how long a pull request waits for review.
Data: a data map (what personal data, where stored, who can query it), retention and deletion process, list of third-party processors.

When NOT to do this

Do not do a big pre-raise rewrite. Nobody funds a rewrite announcement six weeks before closing, and it adds risk right when you need stability.
Do not buy a security certification just for diligence unless your customers or the deal require it. It is slow and expensive, and a clean basics checklist covers most early-stage reviews.
Do not hide problems. Reviewers talk to your engineers. A concealed issue found later costs more than the same issue disclosed.
Skip heavy preparation at very early stages. For a pre-seed round where investors want to see a demo and talk to you, a full audit is overkill. Fix the access and IP basics and move on.

Common mistakes

Leaving IP paperwork until the lawyers ask, then chasing a contractor who has moved on.
Over-polishing the code instead of fixing the access and backup basics.
Letting the best engineer present everything, which makes the bus factor visible in the room.
Claiming scale numbers you cannot back with a graph or a test.
Starting two weeks before the review, when the legal and access items need longer.
Treating the diligence as a technical exam rather than a trust conversation.

Checklist

Get a second pair of eyes before the investor's

If you want an outside engineer to run this self-audit with you and give an honest read of where you stand, that is part of what a fractional CTO does. The usual deliverable is a short written risk list and a prioritised fix plan, similar to the architecture review deliverables. Book a free 30-minute technical review via the contact page and we will talk through where your biggest exposure is. More on the wider role is in the startup leadership guide.

FAQ

When should I start preparing for technical due diligence?

Four to six weeks before you expect investors to ask for access, and earlier if you have contractor IP or access clean-up to do. Those items depend on other people and take the longest.

Will investors read my source code?

It varies by stage and investor. Early rounds often involve a conversation and a look at your architecture. Later rounds more often include a code and infrastructure review by an outside engineer. Ask your investor what to expect rather than assuming.

Is technical debt a deal-breaker?

Rarely on its own. Reviewers worry more about hidden debt, no plan to manage it, or debt in the part of the system that makes money.

Do I need a CTO to run this?

You need someone technical and independent enough to be honest with you. That can be your CTO, an outside advisor or a fractional CTO. It should not be someone whose work is being reviewed.