The Process of Technical DD for Startups and VCs: A Complete Guide

Why do some startups quickly win big investments while others get rejected?

It’s not just about a great idea or a cool pitch deck. Big investors want to know what’s happening behind the scenes, especially the tech side.

Before they invest, they take a deep look inside the startup.

They carefully check how the product is built, how safe and scalable the code is, and whether the tech team is strong enough to handle future growth. This detailed checking process is called Tech Due Diligence (Tech DD).

In this blog, we’ll break down Tech DD in easy-to-understand language, step-by-step, and also show you how to offer this service yourself.

Let’s start this journey!

What is the Process of Technical DD?

The Process of Technical Due Diligence (Tech DD) is a step-by-step method used by big investors, especially venture capitalists (VCs), to check how strong and reliable a startup’s technology is. This process helps investors decide if a startup is ready for funding or needs improvements.

It starts with basic research, then goes deeper into product quality, the tech team, code structure, infrastructure, scalability, and security. Experts are often called in to review the code, test the system, and talk to the technical team. At the end, VCs prepare a report that highlights the strengths, risks, and areas that need improvement.

This process not only helps VCs make smarter decisions but also helps startups identify their weak points, improve their systems, and prepare for growth.

So let’s understand the process of technical DD:

Pre-Tech DD Preparation

Before jumping into deep technical checks, big investors (VCs) do some early research to see if the startup is worth more attention. This step helps save time and filters out unfit startups early.

• Initial Research: Investors study the startup’s market, competition, and whether the product fits market needs.
• Pitch Deck Review: They check if the technical claims in the pitch deck are realistic or over-promised.
• Introductory Call: A first call with the founders helps VCs understand the business and technology at a high level.

This early stage is like checking if the startup is even ready for a full health check.

Core Areas of Tech Due Diligence

Once the startup passes the first stage, Tech DD goes deeper. It covers all key parts of the tech side, product, people, systems, code, and more.

A. Product Assessment

A startup’s product is its heart. Investors want to know if it’s strong, well-designed, and ready to grow.

• Architecture: Is the system built in a way that supports future growth and new features?
• Tech Stack: Are the tools modern, secure, and easy to maintain?
• Unique IP: Does the startup have its special tech that others can’t easily copy?
• Product Roadmap: Is there a smart plan to add useful features in the future?
• UX/UI: Is the product easy to use and visually appealing to its target users?

This part helps investors judge if the product is future-ready and user-friendly.

B. Team Evaluation

Even a great idea fails without the right people. So, VCs check if the tech team can build and scale the product.

• Engineering Talent: Does the team have experts for front-end, back-end, DevOps, and product?
• Founders’ Tech Skills: If key members are unclear, disengaged, or planning to exit, it can be a major red flag during due diligence. Signs a startup might be failing often start with leadership misalignment.
• Hiring Plans: Is there a proper strategy to grow the team as the startup grows?

A strong and balanced team shows that the startup is ready to handle technical challenges.

C. Code Review

VCs don’t just take the product at face value; they also check what’s under the hood: the code.

• Code Quality: Is the code clean, well-organized, and easy to understand?
• Documentation: Are things properly explained for future developers?
• Version Control: Are Git or similar tools used for tracking changes?
• Code Security: Does the code use best practices for safety and data protection?

Good code shows discipline and long-term thinking, which investors love to see.

D. Infrastructure and DevOps

A good product also needs a strong setup behind it. This section checks how the product is hosted, managed, and updated.

• Cloud Setup: Are cloud services like AWS or GCP utilised effectively for performance and cost savings?
• DevOps: Are tools used to automate builds, tests, and deployments (CI/CD)?
• Data Handling: Is user data managed safely with backup and legal privacy rules in place?

This shows if the startup can run smoothly, scale easily, and avoid downtime.

E. Scalability

Investors want to know: If users grow from 100 to 1 million, can the system handle it?

• Traffic Handling: Can the app handle high loads without crashing?
• Performance Testing: Are tests done to measure speed and performance?
• Modularity: Is the system broken into parts (like microservices) for easier upgrades?

This helps judge if the product is ready for real growth and expansion.

F. Security and Compliance

Startups often collect user data, so VCs check if it’s safe and compliant with laws.

• Security Audits: Have experts tested the app for known issues?
• Access Control: Are there strict rules governing who can view or modify what?
• Compliance: Are rules like GDPR, SOC2, or ISO27001 followed?

Security builds trust. VCs want startups that take it seriously.

G. Metrics That Matter

Numbers speak louder than words. VCs track specific metrics to judge how the team and product are performing.

• MTTR: How fast does the team fix critical bugs?
• Deployment Frequency: How often are updates released?
• Bug Density: How many bugs exist in the code?
• Uptime: Is the system running smoothly most of the time?
• Customer Feedback (NPS): Are users happy and likely to recommend the product?

These numbers help VCs make smart, data-based investment decisions.

How Big VCs Do Tech DD?

Big venture firms follow a detailed and organized process to check a startup’s technology. They want to be 100% sure before investing. 

Here’s how their process usually looks:

Step 1: Kick-Off Meeting

• They start with a meeting to understand the startup’s goals, timeline, and what parts of the tech need attention.

Step 2: Data Room Setup

• The startup shares important documents like code, architecture diagrams, and system access in a safe and private way.

Step 3: Expert & In-Depth Review 

• VCs invite technical experts to look at the product, codebase, tools, and tech stack carefully.
• They do a deep check of the code, APIs, database design, cloud setup, and how well the system can scale.

Step 5: Tech Team Interviews

• VCs talk to the CTO, lead developers, and product managers to understand how aligned the team is and how well they work together.

Step 6: Scalability Testing

• They test or review reports on how the system performs under pressure, like when many users use it at once.

Step 7: Final Report

• A summary is created that lists strengths, risks, and areas that need improvement. This report helps them decide whether to invest.

This step-by-step flow helps investors avoid surprises and make smart decisions.

Why Big VCs Stand Out in Tech DD?

Big VCs don’t just do a basic check; they go deeper to really understand the startup’s tech and team.

• Market Fit: They check if the tech supports long-term business goals.
• Helpful Feedback: They guide startups during the process to fill any gaps.
• Strong Network: They bring top experts to evaluate each part deeply.
• Ongoing Help: They don’t just point out problems, they help solve them too.

Their goal is to build long-term winners, not just invest and forget.

How Can You Offer Tech DD Services?

If you’re planning to help startups and investors with Tech DD, here’s how you can do it smartly:

• Build a Framework: Create a checklist and process that you can follow every time.
• Partner with Experts: Collaborate with specialists in security, DevOps, and cloud.
• Automate Data Collection: Use tools to pull real-time metrics from GitHub, Jira, or AWS.
• Share Clear Reports: Give easy-to-read reports with real, helpful advice.
• Target Startups and VCs: Show how your service adds value during growth and fundraising.

With the right approach, you can offer a service that’s in high demand and very impactful.

Best Tools to Use for Tech DD

Tech DD is easier and faster with the right tools. Here's a simple breakdown by category:

Codebase Analysis

• SonarQube, DeepSource: Check code for bugs, quality, and best practices.
• Snyk, Mend: Scan open-source libraries for security issues.

Infrastructure & DevOps

• AWS CloudWatch, Datadog: Monitor app health and cloud costs.
• Jenkins, CircleCI: Track how code is built, tested, and deployed.

Performance Testing

• JMeter, Gatling: Test how the app behaves under heavy traffic.

Security Checks

• Burp Suite: Find app-level security flaws.
• Qualys, Cynet 360: Check systems for vulnerabilities and compliance.

Reporting Tools

• Google Data Studio, Looker: Create real-time dashboards and charts.
• CodeClimate Velocity: Measure team performance like code delivery speed.

SaaS Monitoring

• AppDynamics, New Relic: Monitor user experience and system performance.

Communication & Docs

• Slack: Set alerts for build or security issues.
• Confluence: Create and store Tech DD reports using templates.

A Simple Tech DD Workflow (with Automation)

Here’s how you can set up a smooth and automated Tech DD process:

1. Kickoff: Use forms or templates to collect startup info (via Confluence or Typeform).
2. Code Review: Automate scans with SonarQube and Snyk. Use GitHub Insights for activity metrics.
3. Infra Check: Use Datadog or CloudWatch to track infrastructure health.
4. Load Testing: Run tests using JMeter or Gatling in CI pipelines.
5. Security Scans: Schedule scans with Burp Suite or Qualys.
6. Final Reports: Collect everything into dashboards (Looker/Data Studio) and share via Confluence.

Automation makes Tech DD faster, more reliable, and more valuable.

Conclusion

Tech Due Diligence is more than a checklist; it’s a way to understand if a startup is ready to grow truly. For VCs, it’s a smart way to reduce risks. For startups, it’s an opportunity to solidify their foundation. And if you’re offering this as a service, a structured and automated approach will set you apart.

Have questions or need help with Tech DD? Contact us, we’re here to support you.

Thanks for reading! See you again with more easy tech insights.