Business
Technical Due Diligence
What technical due diligence covers and when investors need it
Definition
Technical due diligence is an evaluation of a company's technology stack, codebase, architecture, infrastructure, security posture, and engineering team conducted before an investment or acquisition. It identifies technical debt, scalability risks, and capability gaps that could affect valuation or post-deal execution.
How it works
Technical due diligence answers three questions: Does the technology work? Can it scale? Can the team maintain and extend it? The review typically covers architecture, code quality, security, infrastructure, data management, and team composition.
The depth depends on the deal. A seed-stage investment might need a 2-day review focused on architecture choices and founder technical capability. A growth-stage acquisition might require 2-3 weeks covering code audits, load testing, security penetration testing, and IP review.
Common findings include: undocumented single points of failure, test coverage below 30%, security vulnerabilities in authentication flows, infrastructure that cannot handle 10x current load, and key-person dependencies where one engineer holds all the context.
How 1Raft uses Technical Due Diligence
1Raft conducts technical due diligence for investors and acquirers evaluating software companies. We review architecture, code, infrastructure, and team, then deliver a findings report with risk ratings and remediation estimates. Our Fractional CTO service also helps portfolio companies address findings post-deal.
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