How to Prepare for Technical Due Diligence: A Fractional CTO's Checklist

Technical due diligence kills deals.

Not dramatically—not with a single devastating finding. It kills them slowly, through accumulating concerns that erode investor confidence. "The architecture seems okay, but we have questions." "The team is good, but the tech debt is worse than we thought." "We're going to need to adjust our valuation expectations."

Having sat on both sides of due diligence tables—as a CTO being examined and as an advisor helping investors evaluate targets—I've seen what separates companies that sail through DD from those that stumble.

The difference isn't technical excellence. It's preparation.

This guide provides a comprehensive framework for preparing your company for technical due diligence, whether you're raising seed, Series A, or preparing for acquisition.

What Investors and Acquirers Actually Look For

Let's start with the uncomfortable truth: technical due diligence isn't primarily about finding problems. It's about calibrating risk.

Every startup has technical issues. Investors know this. What they're really assessing is:

1. Do you know what your problems are? Self-awareness matters more than perfection.
2. Are the problems fixable? Some issues are expensive but solvable. Others are structural.
3. Is the team capable of fixing them? The people matter as much as the code.
4. Are there hidden risks? Security vulnerabilities, compliance gaps, IP issues.
5. Does the technology support the business plan? Can you actually deliver what you're promising?

Due diligence failures rarely come from technical debt alone. They come from:

• Being surprised by problems you should have known about
• Lacking a credible plan to address known issues
• Discovering the technology can't support the growth you're projecting
• Finding risks that weren't disclosed (security, compliance, IP)
• Sensing that the team doesn't fully understand their own system

The 7 Areas Every Due Diligence Covers

1. Code Quality and Architecture

What they examine:

• Overall code structure and organisation
• Consistency of coding standards
• Test coverage and quality
• Documentation (or lack thereof)
• Dependency management and currency
• Architectural patterns and their appropriateness

What they're looking for:

• Evidence of engineering discipline
• Scalability bottlenecks
• Maintenance burden indicators
• Signs of sustainable development practices

Red flags:

• No version control or poor commit practices
• Missing or failing tests
• Outdated dependencies with known vulnerabilities
• Monolithic architectures that can't scale
• "It works but nobody knows why" areas

2. Infrastructure and Scalability

What they examine:

• Hosting and cloud architecture
• Database design and performance
• Caching and optimisation strategies
• Deployment processes
• Monitoring and observability
• Disaster recovery and backup procedures

What they're looking for:

• Can this infrastructure handle 10x growth?
• What's the cost profile at scale?
• How quickly can issues be detected and resolved?
• What happens if [critical component] fails?

Red flags:

• Single points of failure
• No monitoring or alerting
• Manual deployment processes
• No backup or disaster recovery plan
• Cost structures that don't scale linearly

3. Security and Compliance

What they examine:

• Authentication and authorisation systems
• Data encryption (at rest and in transit)
• Vulnerability management
• Access controls and audit logging
• Compliance with relevant regulations (GDPR, SOC2, PCI, etc.)
• Security incident history and response

What they're looking for:

• Appropriate security practices for the data you handle
• Awareness of compliance requirements
• Evidence of security thinking, not just security tools
• Ability to pass customer security questionnaires

Red flags:

• Storing passwords in plaintext
• No encryption for sensitive data
• Missing audit logs
• Unknown compliance gaps
• Security treated as an afterthought

4. Team and Organisation

What they examine:

• Team structure and roles
• Hiring plans and ability to execute
• Key person dependencies
• Technical leadership capabilities
• Development processes and velocity
• Team tenure and turnover

What they're looking for:

• Can this team deliver the roadmap?
• What happens if key people leave?
• Is there a culture of engineering excellence?
• Does the team work effectively together?

Red flags:

• Entire system knowledge in one person's head
• High turnover in engineering
• No clear development process
• Misalignment between team size and ambition
• Technical debt blamed on "those who came before"

5. Intellectual Property

What they examine:

• IP ownership and assignment agreements
• Open source licence compliance
• Third-party code and dependencies
• Contractor agreements and work product ownership
• Patent and trademark status
• Previous employer IP conflicts

What they're looking for:

• Clear ownership of all code
• No licensing time bombs
• No potential IP disputes
• Appropriate use of open source

Red flags:

• Missing IP assignment agreements
• GPL code in proprietary products
• Code written by contractors without proper agreements
• Dependencies with problematic licences
• Founding team with non-compete concerns

6. Technical Debt Assessment

What they examine:

• Known technical debt inventory
• Debt servicing approach
• Impact on velocity
• Critical vs manageable debt
• Remediation timeline and cost

What they're looking for:

• Honest acknowledgment of debt
• Reasonable plan for managing it
• Debt that doesn't block growth
• Understanding of debt/velocity relationship

Red flags:

• Denial that technical debt exists
• Debt that prevents feature delivery
• No plan for addressing critical issues
• Debt growing faster than it's being paid

7. Product and Technology Roadmap

What they examine:

• Technical feasibility of planned features
• Resource requirements vs available resources
• Technology choices for future development
• Platform and scalability investments
• Build vs buy decisions
• AI and emerging technology strategy

What they're looking for:

• Realistic roadmap given current capabilities
• Technology strategy aligned with business strategy
• Appropriate investment in platform vs features
• Awareness of technology trends and opportunities

Red flags:

• Roadmap requires technology team doesn't have
• No investment in scalability before you need it
• Feature promises that exceed technical capability
• Ignoring relevant technology shifts

90-Day Preparation Timeline for Fundraising

Days 1-30: Assessment and Documentation

Week 1-2: Internal Technical Audit

• Document current architecture (diagrams, not just text)
• List all known technical debt with severity ratings
• Review security practices and identify gaps
• Assess test coverage and quality
• Evaluate infrastructure scalability

Week 3-4: Documentation Sprint

• System architecture documentation
• API documentation (if applicable)
• Deployment and operations runbooks
• Security policies and procedures
• Development process documentation

Deliverables by Day 30:

• Architecture diagrams (system, data, infrastructure)
• Technical debt register with prioritisation
• Security assessment summary
• Documentation inventory

Days 31-60: Remediation and Improvement

Week 5-6: Critical Issues

• Address any security vulnerabilities
• Fix compliance gaps
• Update critically outdated dependencies
• Improve test coverage on critical paths

Week 7-8: Process Improvements

• Implement or improve monitoring
• Establish incident response procedures
• Clean up deployment processes
• Create or update onboarding documentation

Deliverables by Day 60:

• Security vulnerabilities resolved
• Monitoring dashboards operational
• Critical technical debt addressed
• Process documentation complete

Days 61-90: Narrative and Readiness

Week 9-10: Story Development

• Prepare technology narrative for investors
• Create board-ready technical summary
• Develop answers to common DD questions
• Prepare data room technical section

Week 11-12: Dry Run and Refinement

• Conduct internal DD simulation
• Prepare technical team for DD interviews
• Refine documentation based on gaps identified
• Final data room preparation

Deliverables by Day 90:

• Data room complete and organised
• Team briefed on DD process
• FAQ document for common questions
• Investor-ready technical summary

Common Due Diligence Failures (And How to Avoid Them)

Failure 1: The "We Didn't Know" Surprise

What happens: DD reveals issues that clearly should have been known—security vulnerabilities in production, failing tests, critical bugs.

Why it kills deals: If you don't know about obvious problems, what else don't you know?

How to avoid: Conduct your own technical audit before DD. Know your problems before someone else finds them.

Failure 2: The "We'll Fix It Later" Dismissal

What happens: When issues are raised, the response is "yes, we know, we'll get to it after funding."

Why it kills deals: It suggests lack of discipline and poor prioritisation. If it's important, why hasn't it been addressed?

How to avoid: Have a credible remediation plan with timelines and resource allocation. Better yet, fix critical issues before DD starts.

Failure 3: The Documentation Desert

What happens: DD team asks for architecture diagrams, security policies, deployment procedures—and you have nothing.

Why it kills deals: It signals that engineering operates informally, which doesn't scale.

How to avoid: Create documentation as part of normal engineering practice, not as a DD fire drill.

Failure 4: The Single Point of Failure

What happens: DD reveals that all critical knowledge lives in one person's head.

Why it kills deals: Key person risk is existential at early stages.

How to avoid: Document critical systems. Cross-train team members. Ensure no one is irreplaceable.

Failure 5: The IP Ambiguity

What happens: Ownership of code is unclear—missing contractor agreements, potential conflicts with previous employers, problematic open source usage.

Why it kills deals: IP issues can invalidate the entire investment.

How to avoid: Audit IP chain of custody. Ensure all agreements are signed and filed. Review open source licences.

Failure 6: The Optimistic Roadmap

What happens: Technical team can't articulate how they'll deliver the features promised in the business plan.

Why it kills deals: If technology can't deliver, the business plan fails.

How to avoid: Align technical roadmap with business roadmap. Ensure feasibility of commitments.

Documentation Checklist for DD Readiness

Must Have (Data Room Essentials)

• System architecture diagram (current state)
• Data flow diagram
• Infrastructure architecture diagram
• Technology stack summary
• Technical debt summary with prioritisation
• Security policy document
• Compliance status (GDPR, SOC2, etc.)
• IP assignment agreements for all contributors
• Open source licence audit
• Team org chart and key responsibilities
• Development process overview

Should Have (Accelerates DD)

• API documentation
• Database schema documentation
• Deployment and operations runbooks
• Incident response procedures
• Test coverage report
• Performance benchmarks
• Cost analysis and projections
• Security penetration test results
• Dependency audit
• Scalability analysis

Nice to Have (Demonstrates Excellence)

• ADRs (Architecture Decision Records)
• Postmortem reports from past incidents
• Engineering team handbook
• Technical onboarding guide
• Performance monitoring dashboards
• Capacity planning documentation
• Vendor evaluation criteria
• Build vs buy decision records

How a Fractional CTO Accelerates DD Readiness

Preparing for due diligence while running a business is challenging. A fractional CTO helps by:

Providing Experienced Assessment

Having been through DD multiple times, a fractional CTO knows what investors look for. They can quickly identify:

• What issues will concern investors
• What issues won't matter
• Where to focus limited preparation time
• What narrative to build around known weaknesses

Accelerating Documentation

A fractional CTO has templates and patterns from previous engagements. Instead of starting from scratch, you're adapting proven formats.

Conducting Mock DD

Before real DD, a fractional CTO can simulate the process—asking the questions investors will ask, identifying gaps, and helping the team practice responses.

Providing Air Cover

During DD, having an experienced technical leader who can field questions and translate between technical team and investors significantly smooths the process.

Validating Remediation

As you address issues, a fractional CTO can validate that fixes are appropriate—neither over-engineered nor insufficient.

Getting DD-Ready

Due diligence shouldn't be a scramble. With 90 days of focused preparation, you can enter the process confident that you know your own technology better than any external reviewer will.

The goal isn't perfection—every company has issues. The goal is awareness, honesty, and credible plans for improvement.

If you're preparing for fundraising and want to ensure your technology story supports rather than undermines your raise, a fractional CTO can help you get DD-ready efficiently.

The worst time to discover technical problems is when investors discover them first. The best time is 90 days before DD starts.