Days 1-20: Assessment & Documentation
Conduct gap analysis, organize existing docs, create missing artifacts
- Gap analysis
- Documentation inventory
- Remediation plan
technology-strategy16 min read
Preparing for Technical Due Diligence: Investor Checklist
A concise, investor-ready preparation guide to pass technical due diligence with evidence—not anecdotes. Includes a data room index, what investors assess, required metrics, security/compliance and AI governance expectations, scalability proof requirements, and a practical implementation checklist.
By Technology Strategy Team
Summary
Poor technical due diligence preparation costs startups an average of 30% in valuation and delays funding rounds by 2-3 months. This guide provides a structured framework to prepare your technical package with evidence-based documentation, reliable metrics, and scalable architecture proofs that build investor confidence.
Why Due Diligence Preparation Matters
| Preparation Factor | Business Impact | Risk Level | Valuation Impact |
|---|---|---|---|
| Poor documentation | Deal delays + increased scrutiny | High | 15-25% valuation reduction |
| Missing metrics | Unproven performance + growth claims | Critical | 20-30% valuation impact |
| Security gaps | Increased liability + compliance risk | Critical | Deal termination risk |
| Scalability concerns | Growth limitations + technical risk | High | 25-40% valuation impact |
| Team capability questions | Execution risk + talent concerns | Medium | 15-20% valuation impact |
| AI governance issues | Regulatory risk + ethical concerns | High | Future funding risk |
Data Room Framework
| Document Category | Required Artifacts | Evidence Standards | Owner |
|---|---|---|---|
| Architecture & Infrastructure | System diagrams, dependency maps, environment specs | Current state, change history, scalability proofs | CTO/Lead Engineer |
| Security & Compliance | Security controls, audit reports, compliance documentation | Risk assessments, remediation plans, policy compliance | Security Lead |
| Performance & Reliability | SLO dashboards, incident reports, performance metrics | Historical data, trend analysis, improvement plans | Engineering Lead |
| Development & Delivery | CI/CD pipelines, release processes, quality metrics | Delivery velocity, quality gates, deployment success | DevOps Lead |
| Data Management | Data architecture, backup strategies, privacy controls | Data integrity, recovery capabilities, compliance | Data Lead |
| Team & Operations | Team structure, operational processes, support systems | Team capability, operational maturity, scaling plans | Operations Lead |
Investor Assessment Criteria
| Assessment Area | Key Questions | Strong Signals | Risk Indicators |
|---|---|---|---|
| Technical Architecture | Is the architecture scalable and maintainable? | Clear boundaries, modern patterns, documented evolution | Monolithic design, technical debt, outdated stack |
| Team Capability | Can the team execute and scale? | Strong technical leadership, proven delivery, talent pipeline | Key person risk, skill gaps, high turnover |
| Security Posture | Are systems secure and compliant? | Proactive security, compliance adherence, incident readiness | Security gaps, compliance issues, poor controls |
| Operational Excellence | Can operations scale with growth? | Reliable systems, good monitoring, efficient processes | Frequent outages, poor monitoring, manual processes |
| Data Management | Is data reliable and scalable? | Good data practices, scalability, privacy compliance | Data quality issues, scalability limits, privacy risks |
| Product Development | Can the product evolve quickly? | Fast iteration, quality delivery, user-centric approach | Slow development, quality issues, poor user focus |
Success Metrics and KPIs
| Metric Category | Key Metrics | Target Benchmarks | Evidence Requirements |
|---|---|---|---|
| System Reliability | Uptime, error rates, incident frequency | >99.9% availability, <1% error rate | Historical dashboards, incident reports |
| Development Velocity | Deployment frequency, lead time, change failure rate | Daily deployments, <1 day lead time | CI/CD metrics, release logs |
| Security Posture | Vulnerability counts, time to remediate, compliance status | Zero critical vulnerabilities, <7 day remediation | Scan reports, audit results |
| Scalability | Load capacity, response times, resource utilization | 10x current load, <200ms response times | Load test results, performance data |
| Team Performance | Velocity, quality metrics, team satisfaction | Consistent velocity, >95% quality | Team metrics, satisfaction surveys |
| Cost Efficiency | Infrastructure cost, unit economics, resource utilization | Optimized costs, improving unit economics | Cost reports, utilization data |
Team Requirements and Roles
| Role | Time Commitment | Key Responsibilities | Critical Deliverables |
|---|---|---|---|
| CTO/Technical Founder | 40-60% | Overall technical strategy, investor communication | Technical narrative, architecture overview, team capability |
| Engineering Lead | 50-70% | Technical documentation, system demonstrations | Architecture docs, performance data, scalability proofs |
| Security Lead | 30-50% | Security documentation, compliance evidence | Security assessments, compliance reports, risk mitigation |
| Product Lead | 20-30% | Product roadmap, development processes | Roadmap alignment, development metrics, user feedback |
| Operations Lead | 30-40% | Operational processes, team structure | Operational docs, team structure, scaling plans |
| Project Manager | 60-80% | Coordination, timeline management, document organization | Project plan, status updates, document readiness |
Cost Analysis and Budget Planning
| Cost Category | Early Stage ($) | Growth Stage ($$) | Scale Stage ($$$) |
|---|---|---|---|
| Team Time Allocation | $50K-$100K | $100K-$250K | $250K-$500K |
| Documentation Tools | $5K-$15K | $15K-$40K | $40K-$80K |
| Security Assessments | $10K-$30K | $30K-$75K | $75K-$150K |
| Performance Testing | $8K-$20K | $20K-$50K | $50K-$100K |
| Consulting Support | $15K-$40K | $40K-$100K | $100K-$200K |
| Contingency Reserve | $10K-$25K | $25K-$60K | $60K-$120K |
| Total Budget Range | $98K-$230K | $230K-$575K | $575K-$1.15M |
60-Day Preparation Plan
Structured approach from assessment to investor readiness
Days 21-40: Improvement & Validation
Address critical gaps, validate metrics, conduct security reviews
- Improved documentation
- Validated metrics
- Security assessment
Days 41-60: Polish & Practice
Finalize data room, practice presentations, prepare for questions
- Complete data room
- Presentation materials
- Q&A preparation
Quick Wins and Immediate Actions
Organize Existing Documentation
Gather and structure current technical documents
- Quick progress
- Foundation building
- Gap identification
Create Executive Summary
Develop high-level technical overview for investors
- Clear communication
- Investor confidence
- Strategic alignment
Establish Key Metrics
Identify and document critical performance indicators
- Evidence-based presentation
- Performance demonstration
- Progress tracking
Conduct Security Review
Perform basic security assessment and document controls
- Risk mitigation
- Compliance demonstration
- Investor confidence
Prepare Team Overview
Document team structure, capabilities, and experience
- Team capability demonstration
- Execution confidence
- Talent validation
Set Up Data Room Structure
Create organized digital repository for documents
- Professional presentation
- Easy access
- Efficient review
AI-Assisted Preparation
Documentation Analysis
Analyze existing docs and identify gaps and improvements
- Completeness assurance
- Quality improvement
- Time savings
Metric Optimization
Suggest optimal metrics and presentation approaches
- Effective communication
- Investor alignment
- Impact maximization
Risk Assessment
Identify technical risks and suggest mitigation strategies
- Risk management
- Proactive preparation
- Confidence building
Presentation Preparation
Help prepare technical presentations and Q&A materials
- Clear communication
- Thorough preparation
- Confidence building
Compliance Checking
Review documentation for compliance and completeness
- Quality assurance
- Compliance validation
- Risk reduction
Investor Alignment
Analyze investor concerns and prepare targeted responses
- Better alignment
- Effective communication
- Deal optimization
Tools and Resources
Document Management
Notion, Confluence, Google Workspace for document organization
- Organization
- Collaboration
- Access control
Data Room Platforms
DocSend, SecureDocs, Firmex for investor document sharing
- Security
- Tracking
- Professional presentation
Metrics & Monitoring
Datadog, New Relic, Google Analytics for performance data
- Performance evidence
- Trend analysis
- Issue detection
Security Tools
Vulnerability scanners, compliance checkers, security frameworks
- Security validation
- Compliance evidence
- Risk assessment
Communication Platforms
Slack, Zoom, Loom for team coordination and presentations
- Team coordination
- Practice sessions
- Investor communication
Project Management
Asana, Jira, Trello for preparation timeline management
- Progress tracking
- Task management
- Timeline adherence
Risk Management Framework
| Risk Category | Likelihood | Impact | Mitigation Strategy | Owner |
|---|---|---|---|---|
| Incomplete Documentation | High | Medium | Documentation audit, gap analysis, template creation | Project Manager |
| Performance Gaps | Medium | High | Performance testing, optimization, metric validation | Engineering Lead |
| Security Vulnerabilities | Medium | Critical | Security assessment, remediation, control implementation | Security Lead |
| Team Capability Questions | Low | High | Team documentation, experience highlights, capability demonstration | CTO |
| Scalability Concerns | Medium | High | Load testing, architecture review, scaling plans | Engineering Lead |
| Compliance Issues | Low | Critical | Compliance audit, gap remediation, policy development | Compliance Lead |
Anti-Patterns to Avoid
Over-Promising Capabilities
Making claims that can't be substantiated with evidence
- Credibility maintenance
- Trust building
- Realistic expectations
Hiding Technical Debt
Concealing technical issues that will be discovered later
- Transparency
- Trust building
- Better valuation
Poor Documentation Organization
Presenting disorganized or incomplete documentation
- Professional presentation
- Efficient review
- Positive impression
Ignoring Security Concerns
Downplaying security issues or compliance gaps
- Risk mitigation
- Compliance assurance
- Investor confidence
Inadequate Team Preparation
Not preparing team for technical interviews and demonstrations
- Confident presentation
- Effective communication
- Team capability demonstration
Missing Performance Data
Failing to provide concrete metrics and performance evidence
- Evidence-based claims
- Performance validation
- Growth potential demonstration
Prerequisites
- Access to current technical documentation and system architecture
- Authority to coordinate across engineering, security, and product teams
- Basic understanding of current metrics and performance data
- Knowledge of upcoming fundraising timeline and requirements
References & Sources
- VC Technical Due Diligence Standards— Industry standards and expectations for technical due diligence in venture capital
- Startup Technical Documentation Best Practices— Y Combinator guide to technical documentation and due diligence preparation
- Investor Technical Assessment Frameworks— Andreessen Horowitz framework for technical assessment and due diligence
- Security and Compliance Due Diligence— McKinsey research on security and compliance in investment due diligence
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