What Investors Actually Check During Technical Diligence

I've sat through 30+ technical due diligence processes as the CTO or advisor. Here's what actually matters to investors—and what's just security theater.

What Investors Think They're Checking

The DD checklist you receive:

• ✓ Code quality and test coverage
• ✓ Security audit results
• ✓ Scalability assessment
• ✓ Compliance documentation
• ✓ Technical team qualifications

This is the performative part. Investors hire a technical advisor, the advisor runs some automated scans, writes a report, everyone feels good.

What Investors Are Actually Checking

They have three real questions:

1. "Will this system survive success?"

They don't care if your code is elegant. They care if it'll crash when you 10x users in 6 months.

What they check:

• Can you handle a traffic spike? (load testing results)
• What's your largest query by execution time? (they want to see query monitoring)
• How long does a full deployment take? (anything over 1 hour is a red flag)
• What happens when your database dies? (they want to see your disaster recovery plan)

Red flags that kill deals:

• "We haven't done load testing yet" (at Series A)
• Single point of failure architecture (one database, no backups)
• Manual deployment process requiring 3+ engineers
• No rollback strategy

2. "Will the founder be able to hire a real CTO?"

If you're a solo non-technical founder with offshore contractors, investors want proof you can transition to a proper technical team.

What they check:

• Is there documentation? (not just in your CTO's head)
• Are architecture decisions recorded? (ADRs, technical memos, anything)
• Can a new engineer understand the system? (onboarding time matters)
• Is the tech stack hireable? (Ruby on Rails: yes. Custom Haskell blockchain: no)

Red flags:

• "Only Dimitri knows how the payment system works"
• Codebase in a language with no local talent pool
• Zero documentation beyond inline comments
• Proprietary frameworks that lock you to one contractor

3. "How much will we need to invest to fix this?"

They're calculating the "technical debt tax" on their investment.

What they check:

• How many engineers to maintain this? (current team size vs. industry standard)
• What's the next critical refactor? (and how much it costs)
• Are you bleeding money on infrastructure? (cloud spend as % of revenue)
• Can you ship features faster than competitors? (deploy frequency matters)

Red flags:

• 8 engineers, 3 deploys per month (way too slow)
• Infrastructure costs >30% of revenue (pre-scale)
• More time spent on maintenance than features (>60% is death)
• Competitors shipping 10x faster (regardless of reason)

The Questions That Actually Matter

Here's what you should be prepared to answer:

System reliability:

• "What's your uptime over the last 90 days?" (they'll check)
• "Walk me through your last outage." (they want to see how you handle failure)
• "How long would a full system restore take?" (they want a number, not "we haven't tested it")

Team & knowledge:

• "If your CTO quits tomorrow, what breaks?" (the honest answer matters)
• "How long to onboard a senior engineer?" (2+ months is concerning)
• "What's your technical hiring pipeline?" (they want to see planning)

Economics:

• "What's your cost per transaction/user/request?" (they want unit economics)
• "When will infrastructure become your #2 expense?" (shows you've modeled scale)
• "How does your tech spend compare to competitors?" (they'll benchmark)

How to Prepare (If You Have 30 Days)

Week 1: Documentation

• Write architecture decision records for major choices
• Document deployment process step-by-step
• Create system architecture diagram
• List every third-party service dependency

Week 2: Monitoring & Metrics

• Set up application monitoring (DataDog, New Relic, whatever)
• Implement error tracking (Sentry at minimum)
• Run load tests and document results
• Calculate and document unit economics

Week 3: Security & Compliance

• Run automated security scans (OWASP ZAP, Snyk)
• Review access controls (who can access production?)
• Document data handling practices
• Get SOC 2 Type 1 started if relevant

Week 4: Team & Process

• Document engineering hiring process
• Create technical onboarding guide
• Record current deploy frequency and test coverage
• List technical roadmap for next 12 months

The Secret Weapon

The fastest way to pass technical DD?

Hire a fractional CTO 3 months before you raise.

They'll:

• Fix the 3-5 critical issues that kill deals
• Create the documentation investors actually want
• Sit in the DD meetings and answer technical questions
• Give investors confidence you can scale the team

Cost: $25K-$40K Outcome: Get the deal done, higher valuation, fewer renegotiations

The founders who skip this step? They lose 90+ days in DD, often get down-rounded, and sometimes lose the deal entirely.

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Raising in the next 6 months? I do technical DD prep engagements—identify issues before investors do. Book a diagnostic.