The VC Technology Due Diligence Checklist

''' Technology due diligence in venture capital is not a uniform exercise. The checklist an investor uses to scrutinise a seed-stage company bears little resemblance to the audit applied to a late-stage, pre-IPO candidate. The focus evolves from validating potential to verifying maturity.

For founders and operators, understanding this distinction is critical. Knowing what a VC is looking for at your specific stage informs your technical strategy and helps you prepare for the diligence process long before the term sheet arrives. This guide outlines the key areas of a VC's tech DD checklist, contrasting the approach at Series A/B with that of later growth stages.

The Shifting Focus: Series A/B vs. Growth Stage

At Series A/B, the fundamental question is one of validation. Does the technology work? Is the founding team technically credible? Is the architectural foundation solid enough to support the next 18-24 months of growth? The diligence process is geared towards identifying existential risks that could kill the company before it finds product-market fit.

At a growth stage (Series C and beyond), the questions pivot towards long-term scalability and enterprise readiness. The assumption is that the core product works. The focus is now on whether the technology can underpin a business generating tens or hundreds of millions in revenue. Scrutiny intensifies on security, compliance, operational maturity, and the platform’s ability to withstand the rigorous diligence of a future strategic acquirer or public market.

Codebase Health: From "Does it Work?" to "Will it Scale?"

Series A/B: Investors are looking for signals of good practice, not perfection. A messy codebase is not an automatic deal-breaker if the team demonstrates self-awareness and a plan to address technical debt. The checklist includes:

• Structure & Readability: Is the code logically organised and reasonably commented? Can a new engineer get up to speed quickly?
• Testing: Are there any tests? The presence of a basic testing suite, even if coverage is low, indicates a professional mindset.
• Dependencies: Are dependencies managed systematically? Reliance on outdated or unmaintained libraries is a red flag.

The objective is to confirm the codebase isn't a complete rewrite waiting to happen. The emphasis is on the team’s habits and potential.

Growth Stage: Scrutiny deepens significantly. The codebase is now a core business asset that must support rapid, predictable feature development. DD, often conducted by a specialist firm like our Technology Due Diligence practice, will assess:

• Code Quality Metrics: Analysis of cyclomatic complexity, code duplication, and adherence to style guides.
• Test Automation: Depth of unit, integration, and end-to-end test coverage. A robust CI/CD pipeline is expected.
• Technical Debt: A formal assessment of technical debt and the team's process for managing and paying it down.

Key-Person Risk: De-risking the Human Element

Series A/B: This is a primary concern for early-stage investors. If all critical system knowledge resides with a single founder or engineer, it represents a single point of failure. VCs will probe for:

• Knowledge Sharing: Are there code reviews, pair programming sessions, or internal documentation?
• Bus Factor: What would happen if the lead engineer left tomorrow? Is there a second-in-command?

Growth Stage: Established processes and team structures are expected. The focus shifts from individual risk to organisational strength. Diligence will examine the engineering leadership, team pods or squads, and the company's ability to attract and retain senior talent.

Architecture & Scalability: Foundations for Growth

Series A/B: The key question is whether the architecture is fit for its current purpose and can handle near-term growth. A well-reasoned monolith is often preferable to a poorly implemented microservices architecture. Red flags include fundamental design flaws that would require an imminent and costly re-platforming project.

Growth Stage: The architecture must be ready for enterprise-level scale. The DD process will involve a deep dive into:

• Load & Performance Testing: Evidence that the system can handle a 10x or 100x increase in users or data volume.
• Database Scalability: The strategy for scaling the data layer, often a key bottleneck.
• Multi-tenancy & Isolation: For B2B SaaS, the ability to securely serve multiple large customers.

Centralising architectural diagrams, performance reports, and infrastructure-as-code configurations in a data room is standard. The AI-powered Q&A features of a platform like Lens can accelerate a buyer's ability to parse this complex information.

AI Defensibility: Beyond the Feature

Series A/B: With the proliferation of generative AI, VCs are highly sceptical of "thin wrappers." The DD checklist focuses on the underlying defensibility:

• Proprietary Data: Is the model trained on a unique, valuable, and defensible dataset?
• Model Originality: Is it a fine-tuned open-source model or a novel architecture? What is the unique insight?
• Data Acquisition Loop: How does the product generate or acquire new data to continuously improve the model over time?

Growth Stage: The focus expands to MLOps maturity. The questions become more operational:

• Performance Monitoring: How are model drift, accuracy, and bias tracked in production?
• Tooling & Pipeline: What is the process for retraining, validating, and deploying new models?
• Explainability: Can the team explain and audit the AI's outputs, especially for regulated industries?

Security Posture: From Good Practice to Enterprise-Grade

Series A/B: Investors look for basic security hygiene. This includes proper secrets management (e.g., no API keys in the code), dependency scanning, and general awareness of the OWASP Top 10. A complete absence of security thinking is a major red flag.

Growth Stage: Security becomes a critical diligence stream, capable of derailing a deal. The expectation is a mature security program, including:

• Formal Policies & Procedures: Written information security policies.
• Third-Party Audits: Evidence of recent penetration tests and a plan for remediation.
• Compliance: A clear path towards, or achievement of, certifications like SOC 2 or ISO 27001.

For any company selling to enterprise customers, a weak security posture is a direct threat to revenue and, therefore, valuation. '''