Preparing for Technical Due Diligence: Tips for Growing Businesses

If you’re preparing for technical due diligence (TDD), congrats! Your business is growing. Maybe you’ve hit a critical tipping point for scaling up or your company is undergoing some structural changes. Either way, you’re on the path to a new financial investment, partner, merger, or acquisition.

But before you can enjoy all the new benefits, you’ve got to show that your company is as good as you’ve been promising all along. Technical due diligence is the bridge you have to cross to get there.

So how can you and your team prepare for the process? Let’s take a look at some of the most high-leverage moves you can make as you get ready for the cornerstone exam.

Lay a solid documentation foundation

Documentation is the heart of technical due diligence, giving insight into the inner workings of the company. Start by establishing a comprehensive framework for documenting every aspect of your company’s technical operations. These might include:

  • Technology stack. Provide an overview of the tech, frameworks, programming languages, and tools utilized in your software development projects. Explain the reason you chose them.
  • Infrastructure setup. Document the infrastructure architecture (including server configurations), hosting providers, cloud services, network topology, and disaster recovery plans.
  • Coding standards and practices. Detail coding standards, best practices, and conventions that your development teams use to ensure consistency, maintainability, and scalability of your codebases.
  • Quality assurance processes. Describe your company’s procedures for quality assurance, including testing methodologies, automated testing frameworks, bug tracking systems, and regression testing strategies.
  • Software development methodologies. Document your preferred methodologies like Agile, Scrum, or Kanban. Outline the processes your team follows for requirements gathering, design, development, testing, and deployment.
  • Intellectual property. Clearly outline the ownership and protection of intellectual property (IP) rights associated with your software, including copyrights, trademarks, patents, and licensing agreements.
  • Technology and innovation roadmap. Outline your technology roadmap, research and development initiatives, and plans for how you’ll continue to innovate. Highlight what makes you unique, your competitive advantages, and your future growth opportunities.

Keep your documentation organized and accessible

You can have all the documentation in the world, but it’s useless if it’s a hot mess that nobody can figure out. You’ll want to organize it into a repository or system so that the people conducting technical due diligence can access and navigate them easily. This can include strategies like:

  • Centralized repositories. Create a unified place for materials like source code, technical specifications, architecture diagrams, system documentation, and materials. This ensures easy access and version control.
  • Document management systems. Consider document management systems or collaboration platforms that enable secure storage, sharing, and collaboration for everyone who needs it.
  • Access controls. Make sure you set appropriate access controls and permissions to restrict access to sensitive information and maintain confidentiality.

Try your own pre-due-diligence assessments

Before the formal process starts, conduct pre-due diligence assessments internally. These can help you identify potential areas of concern and proactively address them before they become an issue with reviewers and stakeholders. Focus on areas like:

  • Tech infrastructure. Assess the scalability, performance, reliability, and security of your software systems. Look out for any bottlenecks, vulnerabilities, or areas needing improvement.
  • Tech dependencies. Identify and assess dependencies on third-party libraries, frameworks, APIs, and services. Gauge potential risks associated with things like vendor lock-in, license compliance, and supportability.
  • Compliance and security. Evaluate compliance with industry standards, regulations, and security best practices. These might include data protection laws, privacy regulations, and cybersecurity frameworks.
  • Intellectual property rights. Review the ownership, validity, and protection of the intellectual property rights that are associated with your software.
  • Legal and regulatory considerations. Review contracts, agreements, and legal obligations related to things like custom software development, licensing, outsourcing, and intellectual property rights.

Prepare your people

Due diligence involves interactions with various team members across the organization, like software developers, engineers, architects, project managers, legal counsel, and financial advisors. Keep them all well-prepped and in the loop so everyone can have a coordinated and effective response when needed. Here are some ways to prepare your cross-functional teams:

  • Provide training and education. Lead training sessions and workshops to familiarize team members with the due diligence process, their roles and responsibilities, how to answer questions if they’re interviewed, and the documentation required.
  • Designate points of contact. Designate specific individuals as points of contact for different aspects of due diligence. This paves the way for clear communication channels and accountability.
  • Establish response protocols. Develop protocols and guidelines for handling inquiries, providing documentation, and addressing concerns raised during due diligence. This helps maintain professionalism and transparency.

When in doubt, consult the pros

Technical due diligence is complex (and often tedious). If you’re not feeling prepared internally, consult advisors who can help guide and support you. These might include:

  • Legal advisors. Seek assistance from legal advisors specializing in mergers and acquisitions, intellectual property law, and technology transactions. They can help navigate legal complexities, negotiate terms, and mitigate legal risks.
  • Financial analysts. Financial analysts or investment bankers can assess the financial implications of due diligence findings, conduct valuation analyses, and negotiate favorable terms for investment or acquisition.
  • Technical consultants. Enlist the expertise of technical consultants or subject matter experts in software development, cybersecurity, infrastructure, or compliance. They can help validate technical assessments, address technical challenges, and optimize outcomes.

Prepare for due diligence with your own due diligence

You can’t control how the process will go once technical due diligence begins, but you can control your level of preparedness going into it. When you go the extra mile to collect documents, outline systems and processes, get your facilities ready, and prep your team, everybody wins — you’ll likely save yourself some headaches, and the entities conducting the TDD process will thank you for making it easier.

If you need a helping hand going into your technical diligence process, like an internal audit, consulting services, or improvements to your software, give the team at Dazlab a call. We’d love to help take your business to the next level of growth.


Darren Clark

Dazlab Founder

“I started Dazlab because there’s a huge knowledge deficit between people who want software built and those that build the software. I watched again and again as non-tech product owners with great ideas overpaid for complicated solutions to simple problems, or underpaid only to end up with crummy products with little chance of lasting. Tech doesn’t have to be that way. If I’m going to do something, I’m going to do it well or what’s the point?. Even now, 20 years later I’m still heavily involved in the onboarding process with every one of my clients.”

Darren Clark

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