Technical due diligence is the part of a raise founders prepare for the least — and the part that can quietly kill a term sheet. Investors don’t just diligence your market and your metrics. Before or right after a term sheet, most institutional investors (and increasingly, growth-stage acquirers) run a technical review: architecture, security, team resilience, and how much of the business would break if one engineer left tomorrow.
The good news: technical DD is predictable. The same 12 questions come up in almost every process, whether it’s a lightweight Series A check or a deep pre-acquisition audit. Know them in advance and you can prepare in 30 days instead of scrambling in the three days between the DD request and the closing deadline.
Why technical DD matters more than founders expect
A weak technical DD rarely kills a deal outright — but it reliably does three things: it slows the close by weeks while the investor’s technical advisor digs deeper, it becomes a negotiating lever that shaves points off your valuation, and it can trigger unfavorable terms (escrow holdbacks, remediation clauses) tied to the risks it surfaces. None of that is necessary. Almost every gap a technical DD finds is fixable in weeks if you know it’s coming.
The 12 questions every VC technical DD will ask
| # | Question | What “good” looks like |
|---|---|---|
| 1 | Architecture docs — is there a current system diagram and written rationale for major decisions? | An up-to-date architecture diagram + a short doc explaining key tradeoffs (why this database, why this cloud, why this framework) |
| 2 | Test coverage — what fraction of the codebase is covered, and does CI enforce it? | Meaningful coverage on business-critical paths (not necessarily 100% everywhere), enforced in CI, not just “we have some tests” |
| 3 | Deployment pipeline — can you ship a fix to production in under an hour, safely? | Automated CI/CD with rollback, not a manual SSH-and-pray process |
| 4 | Security posture — pen testing, vulnerability scanning, dependency audits — when was the last one? | A pen test or vulnerability scan within the last 12 months, with findings tracked to closure |
| 5 | Team resilience — what happens if your one senior engineer leaves next month? | Documented ownership spread across at least 2 people per critical system — no single point of failure |
| 6 | IP ownership — do you have signed IP assignment agreements from every contributor, including early contractors? | 100% of code contributors (employees, contractors, co-founders) have signed IP assignment on file |
| 7 | Tech debt visibility — do you know where your tech debt is, and is it prioritized? | A written, ranked list of known debt and its business risk — not “we’ll deal with it eventually” |
| 8 | Dependency audit — are you running outdated or vulnerable open-source packages? | Automated dependency scanning (Dependabot, Snyk, or equivalent) with a patch cadence |
| 9 | Compliance readiness — SOC 2, GDPR, HIPAA — where relevant to your market, is there a plan or a certification in progress? | Either current certification, or a documented roadmap with owner and target date |
| 10 | Scaling proof — has the system been load-tested, or does “we think it’ll scale” rest on assumption? | Load test results or real production data showing headroom at 3-5x current volume |
| 11 | Incident history — what broke in the last 12 months, and what changed afterward? | A short incident log with root cause and remediation for each — shows the team learns, not just firefights |
| 12 | Key-person risk — beyond engineering, does the business depend on one person for infrastructure, vendor relationships, or institutional knowledge? | Documented runbooks and at least one backup owner for every critical system and vendor relationship |
This table is also the fastest self-audit you can run today: score yourself 1 (no answer) to 3 (documented and current) on each row, and you’ll know exactly where a real DD would hurt.
How to prepare in 30 days before a raise
You don’t need to fix all 12 areas perfectly — you need defensible answers and visible progress. A realistic 30-day sprint looks like this:
- Week 1 — Run the self-audit above. Rank the gaps by what’s cheapest to fix vs. what would cause the most damage if surfaced unprepared (usually: IP assignment gaps, missing pen test, and undocumented single points of failure).
- Week 2 — Close the cheap, high-impact gaps: get outstanding IP assignments signed, turn on dependency scanning, write the architecture doc if it doesn’t exist.
- Week 3 — Commission a pen test or vulnerability scan if you haven’t had one in the last 12 months; start a load test if scaling proof is thin.
- Week 4 — Assemble the DD packet: architecture doc, test coverage report, incident log, compliance roadmap, signed IP assignments, dependency scan results. Hand it to your lawyer and lead investor proactively — a founder who hands over a clean DD packet unprompted reads as a much lower-risk bet than one who scrambles when asked.
Who should run this — and why it’s a CTO-level job
Technical DD prep touches architecture, security, hiring history, and legal (IP assignment) simultaneously — which is exactly the intersection a CTO is supposed to own. If you’re a non-technical founder, or your technical co-founder is heads-down building and doesn’t have bandwidth to also produce audit-ready documentation, this is a common trigger for bringing in a fractional CTO. It’s also one of the seven concrete signals we cover in 7 signs your startup needs a CTO — due diligence pressure building before a raise is signal #3 on that list.
A fractional CTO can run this exact 30-day playbook: auditing the 12 areas above, prioritizing fixes, and producing the DD packet — without you needing to hire a full-time head of engineering just to get through one raise. For the pricing side of that engagement, see how much a fractional CTO costs — DD prep is usually scoped as a fixed-price project rather than an open-ended retainer.
If you’re 3-6 months from a raise and want an outside, investor-eyes read on where your technical DD would fall short, book a free 15-minute conversation — no commitment, just a clear-eyed audit of what a VC’s technical reviewer would find.