You’ve built something that works. Customers are paying. Revenue is growing. Now you’re raising a Seed or Series A round, and for the first time, someone outside your team is going to look under the hood of your technology.
Technical due diligence is the part of fundraising that catches founders off guard. You’ve rehearsed your pitch, polished your financials, and prepared your market analysis. But when the investor’s technical advisor asks to see your codebase, your deployment pipeline, and your security policies — that’s when things get uncomfortable.
I’ve been on both sides of this process. I’ve conducted tech due diligence on behalf of investors, and I’ve prepared startups for the scrutiny. The difference between founders who sail through and founders who see their valuation cut is almost always preparation, not perfection.
Area 1: Code quality and architecture
What investors check:Is the codebase maintainable? Could a new developer join and be productive within two weeks? Is the architecture appropriate for the current scale and the scale you’re projecting in your pitch deck?
Specific things they look for:Consistent coding standards (linting, formatting). Meaningful commit history (not just “fix stuff”). Test coverage — not 100%, but evidence that critical paths are tested. Clean separation of concerns (not everything in one monolithic file). Documentation of major architectural decisions and trade-offs.
Red flags that kill deals:A codebase that only one person understands. No version control history (yes, I’ve seen this). Copy-pasted code from Stack Overflow with licence issues. A “rewrite from scratch” in the roadmap — investors hear that as “the current system is a dead end.”
How to prepare:Run a static analysis tool (SonarQube, CodeClimate) and fix critical issues. Write architectural decision records for your 3 to 5 biggest design choices. Ensure at least 40% test coverage on core business logic. If your codebase has areas that need refactoring, document them — acknowledged technical debt is far less concerning to investors than hidden debt.
Area 2: Security posture
What investors check: Are there obvious vulnerabilities? Is customer data protected? Could a security incident expose the fund to reputational or legal risk?
Specific things they look for:HTTPS everywhere (no exceptions). Authentication and authorisation properly implemented. Secrets management (no API keys in code or environment files committed to git). GDPR compliance basics — data processing agreements, privacy policy, data retention policy. Dependency scanning for known vulnerabilities. Incident response plan (even a simple one).
Red flags that kill deals:Hardcoded credentials in the repository. No access control — every user can access everything. No encryption at rest for sensitive data. GDPR non-compliance (especially critical for UK and EU investors post-Brexit). No logging or audit trail.
How to prepare: Run a cyber security assessment 6 to 8 weeks before you expect due diligence to begin. Fix any critical or high findings. Document your security practices — even basic ones — in a security policy. Enable two-factor authentication on all production systems and code repositories.
Area 3: Technical debt and scalability
What investors check:Can the system handle 10x the current load? What’s the ratio of feature work to maintenance work? Is the team spending more time fighting fires than building?
Specific things they look for:Database query performance under load. Infrastructure scalability (auto-scaling, load balancing, CDN). Monitoring and alerting (do you know when things break before customers tell you?). Deployment frequency — how often do you ship, and how painful is it? Known technical debt documented with estimated remediation cost.
Red flags that kill deals:Manual deployments that take hours. No monitoring — the team learns about outages from customer complaints. Single points of failure (one server, one database, one developer who understands the payment system). A backlog dominated by bug fixes rather than features.
How to prepare: Run a basic load test (even 2x current peak traffic). Set up monitoring on critical paths (uptime, response time, error rate). Document your known technical debt with rough time estimates for fixing each item. Calculate your deployment frequency and mean time to recovery. A technology health check covers all of this in a structured assessment that you can share with investors.
Area 4: Team and key-person risk
What investors check: Is the team capable of executing the technical roadmap? What happens if a key person leaves? Is knowledge shared or siloed?
Specific things they look for:Team structure and roles clearly defined. Code ownership distributed (not concentrated in one person). Onboarding documentation — could a new hire get productive without the CTO spending a week hand-holding? Hiring plan that matches the roadmap. Evidence of continuous learning (the team stays current with relevant technology).
Red flags that kill deals:The entire codebase was written by one developer who isn’t on the founding team. No documentation — all knowledge is in people’s heads. The technical team can’t articulate the architecture without the founder translating. Planned hires with no recruitment pipeline or timeline.
How to prepare: Write a brief technical team overview: who does what, their experience, and their growth path. Ensure at least two people understand each critical system. Create basic onboarding docs for your development environment. If you have key-person risk, acknowledge it and show your mitigation plan (documentation, cross-training, planned hire). A fractional CTO can help bridge the gap while you recruit.
Area 5: Infrastructure costs and unit economics
What investors check: Are your cloud costs sustainable? Will infrastructure costs scale linearly with revenue, or will they explode as you grow? Is there evidence of cost awareness?
Specific things they look for: Cloud spend relative to revenue (typically should be under 15% for SaaS, lower for other models). Cost trends over the last 6 to 12 months. Evidence of cost optimisation (reserved instances, right-sized resources, unused resource cleanup). Projected infrastructure costs at 5x and 10x scale.
Red flags that kill deals: Cloud costs growing faster than revenue. No cost monitoring or budget alerts. Dev and staging environments running production-grade infrastructure. Logs and data retained indefinitely with no lifecycle policy.
How to prepare: Pull your cloud cost data for the last 12 months. Identify your top 5 cost drivers. Run a quick optimisation pass (shut down unused resources, right-size over-provisioned instances, implement data retention policies). Build a simple model showing projected costs at 3x, 5x, and 10x scale.
The preparation timeline
Ideally, start preparing 8 to 12 weeks before you expect due diligence:
Weeks 1 to 2: Run a technology health check. Identify critical issues across all five areas.
Weeks 3 to 6: Fix deal-breakers. Hardcoded credentials, missing access controls, critical security vulnerabilities, single points of failure. Document what you find and what you fix.
Weeks 7 to 8:Prepare documentation. Architecture overview, security policy, technical debt register, team overview, infrastructure cost summary. This doesn’t need to be extensive — 10 to 15 pages total is usually sufficient.
Weeks 9 to 12:Run a mock due diligence. Have someone external — a technology advisor or experienced CTO — review your codebase and documentation as if they were the investor’s representative. Fix anything they flag.
The cost of not preparing
The most common outcome of poor tech due diligence isn’t a failed round — it’s a reduced valuation. Investors price in the cost and risk of fixing technical issues. A £50,000 remediation backlog might cost you £200,000 to £500,000 in valuation, because investors apply a risk multiplier to uncertainty.
The worst outcome is a deal that dies in due diligence after you’ve spent 3 months on the fundraising process. I’ve seen it happen over issues that could have been fixed in a week — an exposed database, a critical dependency with no licence compliance, a key developer who gave notice the week before due diligence began.
Preparation is cheap compared to the alternative. A technology health check typically costs a fraction of what a single percentage point of dilution represents. The ROI is obvious.