Technical due diligence is a process by which the investor attempts to answer one or more specific questions related to a company’s technology capabilities, before making an investment.
The interview and information gathering aspect of due diligence is very important for a successful process, even if such process is often quite generic. As an investor you want to know, before putting money on the table, that their prospect has the necessary infrastructure, systems, processes and capabilities to accelerate growth and increase business value.
Venture Capital firms or investors in general often want to gain answers on topics like e.g.:
At Audit à la Carte we collaborate closely with your team on short timelines to identify technical risks, opportunities for growth, strengths to build upon, potential areas for cost reduction and additional investment. We help increase your confidence that your investment is sound and will achieve the anticipated return as well as how your potential investment stacks up against other relative companies. And we do this with a business focus using language that is easy to understand, even for non-technical people. Some example focus areas from our recent audits include:
Technical due diligence is for assessing the value of a software system - whether a system is reliable, resilient, scalable and it is compliant to relevant standards. This is being done increasingly in various industries. Buyers or investors require independent technical assessment of the vendor’s systems. They will be interested to know whether the systems they are buying or investing in are scalable to meet future growth targets and according to relevant standards without major additional investment.
Due diligence, including technical, is a VC's duty and responsibility and not just a box to check - know what you’re getting into!
There’s a high rate of execution failures in start- or scale-ups, yet many investors skip technical due diligence or have non-technical partners talk to the CTO for a quick review. Technology must be evaluated at par with financial discipline before giving a company money, often weird that VCs will put cash into teams after incredibly thorough audits of their books, but without really looking at what’s under the hood.
Technical due diligence establishes a more realistic view of the company’s technology and easily highlights cultural qualities and dysfunctions in technical teams by asking important questions. It avoids a lot of surprises during the first board meeting after the investment. It also usually costs less than the lawyers involved in any deal.
We have done technical risk analysis in the following domains, and we're still expanding: