What Is Technical Due Diligence?
Technical due diligence is a structured assessment of a software product's technical health, risks, and scalability. It's most commonly performed before an investment or acquisition, but it's equally valuable for businesses evaluating their own systems.
The goal isn't to find perfection — no codebase is perfect. The goal is to understand the risks, quantify the technical debt, and determine whether the technology can support the business's growth plans.
When You Need It
- Before investing in a software company (seed, Series A, or later)
- Before acquiring a business where software is a core asset
- Before a major build to assess whether existing systems can be extended or need replacing
- Periodically as a health check on your own technology
What to Evaluate
Architecture
How is the system structured? Is it a monolith, microservices, or something in between? The architecture should match the current needs of the business, with a realistic path to scaling if needed.
Key questions: Can components be deployed independently? Are there single points of failure? How are services connected and what happens if one fails? Is the architecture documented?
Code Quality
Code quality isn't about style — it's about maintainability. Can a new developer join the team and be productive within a week? Or is the codebase so tangled that changes in one area break things in another?
Look for automated tests (and their coverage), consistent coding standards, clear separation of concerns, meaningful variable and function names, and documentation of complex business logic.
Technical Debt
All software has technical debt — shortcuts taken to meet deadlines, quick fixes that became permanent, outdated libraries that haven't been updated. The question isn't whether debt exists, but how much there is, whether it's managed, and what the cost of addressing it would be.
Technical debt becomes critical when it slows down feature development, creates security vulnerabilities, or makes the system fragile.
Security
Security assessment should cover authentication and authorisation implementation, data encryption (in transit and at rest), input validation and protection against common vulnerabilities (OWASP Top 10), dependency management (are libraries up to date?), secrets management (are credentials stored securely?), and compliance with relevant regulations (GDPR, PCI-DSS, etc.).
Infrastructure and DevOps
How is the software deployed and operated? Look for automated deployment pipelines (CI/CD), infrastructure as code (reproducible environments), monitoring and alerting, backup and disaster recovery procedures, and scalability (can it handle 10x current load?).
Data
Data is often the most valuable asset. Evaluate the database design and query performance, data integrity and validation, backup procedures and recovery testing, data privacy compliance (GDPR), and whether data can be exported (avoiding vendor lock-in).
Team and Knowledge
The technology is only as strong as the team that maintains it. Assess team size and structure, key-person dependencies (is all knowledge in one person's head?), documentation quality, and onboarding process for new developers.
Red Flags
- No automated tests. Indicates that changes carry high risk and regression is likely.
- Single point of failure (person or system). If one person leaving would cripple the product, that's a critical risk.
- No deployment automation. Manual deployments are slow, error-prone, and don't scale.
- Outdated dependencies. Unpatched libraries are security vulnerabilities waiting to happen.
- No monitoring. If the team doesn't know when things break, the users will tell them — and by then it's too late.
- Excessive complexity. Over-engineered systems are expensive to maintain and fragile.
How to Conduct a Technical Due Diligence
Phase 1: Documentation Review (1–2 days)
Review existing documentation, architecture diagrams, and development processes.
Phase 2: Codebase Assessment (2–3 days)
Analyse code quality, test coverage, dependency health, and security posture.
Phase 3: Infrastructure Review (1–2 days)
Evaluate deployment pipelines, monitoring, scalability, and disaster recovery.
Phase 4: Team Interviews (1–2 days)
Speak with the development team to understand knowledge distribution, processes, and pain points.
Phase 5: Report and Recommendations (1–2 days)
Compile findings into a clear report with risk ratings, cost estimates for remediation, and prioritised recommendations.
A typical technical due diligence engagement takes 1–2 weeks and costs £5,000–£15,000 depending on the size and complexity of the system.
Right Advance Digital provides independent technical due diligence for investors, acquirers, and businesses. We give you a clear, honest assessment of technical risk. Get in touch.