Startup Technical Due Diligence Checklist: What Investors Actually Look For

You've got investor interest. The term sheet is looking promising. Then comes due diligence—and suddenly they want to look under the hood.

Technical due diligence can make or break a deal. I've helped startups prepare for due diligence from pre-seed to Series A, and I've seen what makes investors confident—or concerned. Here's your complete preparation checklist.

What Is Technical Due Diligence?

Technical due diligence is an investor's assessment of your technology, team, and processes. They're trying to answer one question: Can this company deliver on its technical promises?

For early-stage startups, the bar isn't perfection. Investors know you're moving fast with limited resources. What they're looking for is:

• Competence: Do you know what you're doing?
• Honesty: Are you aware of your weaknesses?
• Trajectory: Are things improving or deteriorating?

The Complete Technical Due Diligence Checklist

1. Architecture & Code Quality

What they'll ask:

• "Walk me through your system architecture."
• "How does data flow through your application?"
• "What's your approach to code quality?"

What they'll examine:

• High-level architecture diagram
• Database schema and data model
• API documentation (if applicable)
• Code repository access (they may do a sample review)
• Code review practices
• Testing strategy and coverage

Green flags: Clean architecture, separation of concerns, documented APIs, reasonable test coverage, evidence of code reviews.

Red flags: Monolithic spaghetti code, no tests, no documentation, single points of failure.

2. Infrastructure & DevOps

What they'll ask:

• "How do you deploy code?"
• "What's your uptime like?"
• "How would you handle 10x traffic?"

What they'll examine:

• Hosting environment (cloud provider, configuration)
• CI/CD pipeline documentation
• Deployment frequency and process
• Monitoring and alerting setup
• Incident response procedures
• Backup and disaster recovery plans

Green flags: Automated deployments, infrastructure as code, monitoring dashboards, documented runbooks.

Red flags: Manual deployments, no monitoring, "it works on my machine" syndrome.

3. Security & Compliance

What they'll ask:

• "How do you handle user data?"
• "What security measures are in place?"
• "Are you GDPR compliant?"

What they'll examine:

• Authentication and authorization approach
• Data encryption (at rest and in transit)
• Security audit history (if any)
• GDPR/data privacy compliance
• Penetration testing results
• Security incident history

Green flags: Security-conscious design, encryption everywhere, documented compliance processes, regular security reviews.

Red flags: Plaintext passwords, SQL injection vulnerabilities, no HTTPS, storing data you don't need.

4. Team & Capabilities

What they'll ask:

• "Tell me about your technical team."
• "How do you make technical decisions?"
• "What's your hiring plan?"

What they'll examine:

• Team composition and experience
• Technical leadership structure
• Decision-making processes
• Hiring pipeline and plans
• Contractor/vendor dependencies
• Key person risk assessment

Green flags: Balanced team, clear ownership, documented decisions, realistic hiring plans.

Red flags: Single developer dependency, no technical leadership, all outsourced, no hiring plan.

5. Technical Debt & Roadmap

What they'll ask:

• "What technical debt do you have?"
• "What would you rebuild if you could?"
• "What's blocking your roadmap?"

What they'll examine:

• Known technical debt register
• Planned refactoring work
• Technical roadmap alignment with business goals
• Estimated effort for major features
• Dependencies and blockers

Green flags: Honest acknowledgment of debt, prioritized remediation plan, realistic estimates.

Red flags: "We have no technical debt" (everyone does), no awareness of issues, wildly optimistic timelines.

6. Scalability

What they'll ask:

• "What happens if you get 10x users tomorrow?"
• "Where are your bottlenecks?"
• "What's your scaling strategy?"

What they'll examine:

• Current capacity and utilization
• Identified bottlenecks
• Horizontal vs vertical scaling approach
• Database scaling strategy
• Caching implementation
• Load testing results (if available)

Green flags: Understanding of limitations, clear scaling path, evidence of load testing.

Red flags: No idea of current capacity, "we'll figure it out when we get there."

7. Intellectual Property

What they'll ask:

• "Do you own all your code?"
• "Any open source licensing concerns?"
• "Are there any IP disputes?"

What they'll examine:

• Code ownership (employee vs contractor)
• Open source component inventory
• License compliance
• Patent filings (if applicable)
• Third-party IP dependencies

Green flags: Clear IP ownership, compliant OSS usage, proper contractor agreements.

Red flags: GPL code in proprietary products, unclear contractor IP terms, pending disputes.

How to Prepare

4-6 Weeks Before Due Diligence

1. Conduct a self-assessment using this checklist
2. Document your architecture if you haven't already
3. Clean up obvious issues (security vulnerabilities, broken CI)
4. Prepare honest answers about technical debt

2-4 Weeks Before

1. Create a technical overview document (2-3 pages max)
2. Prepare architecture diagrams (even if imperfect)
3. Gather metrics (uptime, deployment frequency, test coverage)
4. Brief your technical team on what to expect

1 Week Before

1. Ensure repo access is ready to grant
2. Prepare a demo environment if needed
3. Identify who will answer which questions
4. Review this checklist one more time

Common Mistakes to Avoid

1. Hiding problems Investors will find issues. It's better to acknowledge them upfront with a remediation plan than to be caught hiding them.

2. Over-engineering for the review Don't suddenly add tests or documentation just for due diligence. Investors can tell the difference between genuine practices and performance art.

3. Having no technical representation If you're a non-technical founder, have someone credible (fractional CTO, technical advisor) in due diligence meetings.

4. Being unable to explain your own technology You don't need to write code, but you should understand your architecture well enough to explain it clearly.

The Due Diligence Mindset

Remember: investors aren't expecting perfection. They're expecting:

• Honesty about where you are
• Awareness of your problems
• Competence to solve them
• Progress over time

A startup that acknowledges "We have technical debt in our payment system, here's our plan to address it over the next 6 months" is more fundable than one that claims everything is perfect.

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