What is technical due diligence, and what does it cover?
A raise or an acquisition is in motion, technical questions are coming, and nobody inside the company can answer them independently — or you are on the buy side and need someone who can.
Technical due diligence is an independent examination of a company's codebase, architecture, team and technical risk, usually run before a funding round or acquisition. It covers code quality and maintainability, architecture and scalability, security posture, IP ownership and licence compliance, team capability and key-person risk, and delivery process. A typical review runs two to three weeks and produces a written report an investor can rely on. Corelynx runs these as fixed-fee engagements.
Two findings kill deals more often than bad code: unclear IP ownership, usually from contractors who worked without an assignment clause, and a licence in the dependency tree whose terms are incompatible with commercial distribution. Both are cheap to check early and expensive to discover in a data room. If you are twelve months from raising, run the IP and licence checks now — they are the parts that take longest to remediate, and neither improves by waiting.
What diligence actually looks for
- Founders cannot audit their own build. The party that wrote the code also grading it is a structural problem, not a competence one, and investors know it.
- IP ownership is often unclear. Contractor agreements without assignment clauses, code written before incorporation, and open-source licences that were never read are the findings that stop deals.
- Key-person risk is usually understated. If one engineer holds the only working knowledge of a critical system, that is a valuation issue rather than a technical one.
How to prepare for technical due diligence
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01
Collect contractor and employment agreements and confirm every one assigns IP. Do this before anyone asks.
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02
Run an open-source licence scan. Copyleft licences in a commercial product are a finding you want to discover first.
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03
Document the three systems only one person understands, and start reducing that to two.
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04
Write down the architecture and the reasoning behind the major decisions — not for the reviewer, for whoever inherits it.
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05
Commission the review before the raise, not during it. Findings are cheap to fix in advance and expensive to negotiate under a term sheet.
The uncomfortable part is that diligence usually confirms what the technical team already suspected but had no standing to escalate. A review is most valuable when it is commissioned early enough that the findings can be fixed rather than merely disclosed — and that means running it before there is a deal on the table, which is exactly when nobody feels urgency to pay for it.
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