How to Pass Technical Due Diligence: A Founder's Guide

Last quarter, I watched a promising Series A deal fall apart on day three of technical due diligence. The startup had great traction, solid financials, and excited investors. Then the tech audit revealed they were running production on their CTO’s personal AWS account with root credentials shared via Slack.

Deal dead. $5M gone.

Technical due diligence can make or break your funding round. Here’s how to actually prepare (and what investors really care about).

What Investors Actually Check (From Real Due Diligence Reports)

I’ve seen dozens of technical due diligence reports. Here’s what actually matters:

1. Code Quality (They Will Look at Your Code)

Investors hire consultants who spend 2-3 days reviewing your codebase. They check:

• Can a new engineer understand this code in a week? (Not “is it perfect”)
• Do you have any tests at all? (They want 40%+ coverage minimum)
• How many critical bugs are open? (Under 10 is okay, 50+ is a red flag)

Real example: A fintech startup I worked with had zero tests. We added tests for their payment flow and auth system—just the critical paths. That was enough to pass.

2. Architecture (Can This Actually Scale?)

They want to see you’ve thought about growth:

• What happens when you 10x your users?
• Where are the bottlenecks? (It’s fine to have them if you know where they are)
• Do you have a plan to address them?

Don’t lie. One founder told investors “we can scale to millions.” Their database was a single Postgres instance with no replication. The consultant spun up a load test and crashed it in 5 minutes.

3. Security (This Is Where Deals Die)

Investors care most about:

• How you store passwords (bcrypt/Argon2 = good, plain text = deal killer)
• Access control (who can access what?)
• Data handling (do you encrypt sensitive data?)
• Compliance if applicable (HIPAA, SOC 2, GDPR)

Red flag story: Found a startup storing API keys in their GitHub repo. Public repo. Keys were live. We had to rotate everything before due diligence started.

4. Team (Can These People Build This?)

Investors interview your engineers to assess:

• Do they understand the codebase?
• Can they explain technical decisions?
• Is everything in one person’s head? (Knowledge silos kill deals)
• What’s the backup plan if your lead engineer leaves?

How to Actually Prepare (6-Month Timeline)

Month 1-2: Security Audit

This is non-negotiable. Run these checks yourself:

Immediate fixes:

• Remove any hardcoded credentials (API keys, passwords, tokens)
• Enable MFA for all team members
• Review who has admin access (probably too many people)
• Check if you’re exposing any debug endpoints in production
• Make sure you’re using HTTPS everywhere

I use a simple test: Can a random person on your team access production data they shouldn’t see? If yes, fix it.

Month 3-4: Documentation Sprint

Investors want to see you’re organized. Create:

• System architecture diagram (use Excalidraw, doesn’t need to be fancy)
• README files for each major repo
• Runbook for common operations (how to deploy, rollback, handle incidents)
• Security protocols document (what do you do when X happens?)

Time-saver: Don’t document everything. Document what investors will ask about: auth, payments, data storage, and deployment.

Month 5-6: Code Quality Pass

You can’t fix everything. Focus on:

• Add tests for authentication and payment flows (these are critical)
• Fix known security vulnerabilities (run npm audit or equivalent)
• Update critically outdated dependencies (not everything, just the risky ones)
• Add code comments to complex logic

One startup I helped had a gnarly 500-line function handling billing. We didn’t refactor it (no time). We just added detailed comments explaining what it does. Passed due diligence.

Month 6: External Review

Get a fractional CTO or senior engineer to review your setup. They’ll catch:

• Obvious issues you’ve gone blind to
• Missing documentation
• Architectural concerns
• Security gaps

This is your practice run. Better to find issues now than during the actual audit.

Red Flags That Kill Deals (From Actual Failed Due Diligence)

Deal Killers (these will end conversations):

• Security vulnerabilities in auth or payment systems
• No access control (everyone is admin)
• Production credentials shared insecurely
• Obvious data privacy violations
• Critical systems depend on one person who might leave

Serious Concerns (need immediate plans to fix):

• Zero automated tests
• No documentation anywhere
• Outdated dependencies with known security issues
• Single point of failure (one database, one server, one developer)
• No backup or disaster recovery plan

Yellow Flags (okay if you acknowledge them):

• Some technical debt (everyone has this)
• Not fully scalable yet (fine if you have a plan)
• Small team (expected at your stage)
• Using newer technologies (as long as team knows them)

The difference? Investors expect problems. They want to see you know about them and have plans to address them.

The Due Diligence Process

Here’s what typically happens:

1. Initial review - Investors review your tech stack and architecture
2. Code audit - External consultants examine your codebase
3. Security assessment - Evaluation of your security practices
4. Team interviews - Discussions with your technical team
5. Final report - Investors receive recommendations

Get Help

Technical due diligence is serious business. If you’re a non-technical founder, consider working with a fractional CTO who can:

• Prepare your technology for review
• Create investor-ready documentation
• Address technical concerns proactively
• Represent your technical vision to investors

Don’t let technical issues derail your funding round. Schedule a call to discuss how I can help you prepare.