How to prepare for technical due diligence before a raise or sale
A deal can be going well, the terms agreed, the excitement growing, and then it slows or fails at a stage the founders never think about until it starts: technical due diligence. This is where an investor or acquirer sends a technical expert to examine the inner workings of your product before they commit. And the thing that causes problems for most founders is a wrong idea about what that review is for. They think it is an exam on the quality of their code. It is not. It is a search for risk, and, just as much, a test of whether what the founders said about the system is actually true. Here is what those reviewers really look at, how to prepare before they do, and the findings that worry investors most. We have written about diligence from the investor's side in technical due diligence for VC portfolio companies, and this is the same subject from the founder's side.
What technical due diligence actually is
Start with the purpose, because founders who misunderstand it prepare for the wrong thing. A technical reviewer, often an outside advisor the investor trusts, is not there to admire clean code or take away points for style. They are there to answer one question for the person paying them: is there anything in this technology that puts the investment at risk. Everything they look at serves that question.
This view matters, because it tells you what "good" means here. Good is not perfect code. Good is a system whose risks are known, controlled, and honestly described. A reviewer is far more comfortable with a founder who says "here is our biggest weakness and here is our plan for it" than with one who presents everything as flawless and then gets caught by a problem they clearly did not know about. The review is as much about the founders' awareness and honesty as it is about the code, because an investor is depending on the team's judgment for years to come, and diligence is their first real look at whether that judgment can be trusted.
The five things reviewers look at
Under that goal, the review tends to focus on five areas. Knowing them lets you look at your own company the way the reviewer will.
The first is architecture: can the system handle the growth the company is promising. If you are pitching ten times the users, a reviewer wants to see that the design will not stop working at three times. The second is code quality and maintainability: is the codebase something a team can keep building on quickly, or is it so disorganised that every new feature takes longer than the last. The third is security: how you handle logins, access, and sensitive data, and whether you follow basic secure practices and patch known issues. Reviewers often use a shared reference like the OWASP guidelines as a checklist for the common, well-understood risk classes. The fourth is key-person risk: does only one person have critical knowledge, so the company is in danger if they leave. The fifth is technical debt: how much shortcut work is in the system, quietly slowing down everything you build next.
Notice that only two of the five are really about the code itself. The others are about the team, the security practices, and the future cost of past decisions. That is what the reviewer actually cares about: every kind of risk, not how well written any one file is.
The warning signs that worry investors
Some findings do more damage than others, and it helps to know which ones worry reviewers most. The most common serious one is key-person risk: a single engineer who is the only person who understands a core system. Investors strongly dislike this because the whole product then depends on one person, and it is entirely outside their control. It is also one of the most fixable problems, which is exactly why being caught with it looks bad. A large amount of undocumented technical debt is another, because it signals that future progress will be slow and expensive, and slow progress reduces the growth the investor is paying for. Weak or absent security practices, no automated testing, and an architecture that plainly cannot reach the promised scale complete the usual list.
But the single most damaging finding is not on that list of technical problems at all. It is a gap between what the founder said and what the reviewer found. If you described the system as more solid, more scalable, or more complete than it turns out to be, the specific flaw hardly matters. What you have really shown is that your account of your own company cannot be trusted, and once that doubt starts, every other claim you made gets re-examined with suspicion. A moderate technical problem you disclosed is a manageable line item. The same problem discovered after you implied it did not exist can damage the whole deal. Trust is the thing being tested, and it is the thing that is hardest to get back.
How to prepare early
The good news is that you can prepare for almost all of this, and the single best step is to run the review on yourself before anyone runs it on you. Do it months ahead, not during a live deal, because the fixes that matter most take real time.
Start by writing down your architecture and the key decisions behind it, so the reasoning is written down as well as in people's memories. Then deal with key-person risk directly: make sure more than one person understands each critical system, through documentation, pairing, and deliberately spreading knowledge. This alone removes one of the most common and most alarming findings, and it makes your company stronger regardless of any deal. Next, look hard at your worst technical debt and your security gaps. Fix the serious ones, and for the rest, document them clearly with a plan, because a known and explained issue reassures a reviewer while a surprise of the same size frightens them. The instinct to hide known problems is exactly wrong. A serious team is not one with no debt, it is one that knows its debt and is managing it on purpose. That is the same discipline we described in build vs buy: when custom software is actually worth it, where an honest assessment of what a system costs to own is what matters most.
Prepare for a guided review, not an exam
The last change is about how you behave in the review. If you prepare well, diligence stops being an exam you are hoping to pass and becomes a calm review of facts you already know. You are not being caught by surprises, because you found them first. You are not defending inflated claims, because you never made them. You are guiding a reviewer through a system whose strengths and weaknesses you can describe better than they can, with a clear plan for the parts that are not yet where you want them.
That attitude is worth more than any single fix, because it is exactly the awareness and control the reviewer is trying to measure. Do not try to fix everything, which is impossible and unnecessary. Fix the serious risks, especially key-person risk and clear security gaps, document the rest honestly, and know your own system completely. This is the work we do with companies before a raise or a sale: review the architecture, code quality, security, and team risk the way an outside reviewer would, fix what is serious, and document what remains, so there are no surprises in the meeting and the founders can fully support every word they say. A deal rarely fails because of an honest flaw. It fails because of a hidden one. Prepare so there are none left to hide.
What diligence now asks about generated code
Assume the question comes up, because it has become standard. A technical reviewer will want to know what share of your codebase was AI-generated and what your review process was at the time it was written.
There is no wrong answer to the first part. Nobody is penalising generated code in 2026. What gets penalised is not knowing, or knowing and having no review trail, because that is what turns a codebase into an unquantified risk on someone's list.
Two things to have ready. A clear account of your review practice, ideally visible in your pull request history rather than described in a slide. And your dependency and licence position, since questions about where code came from matter most here. Both are easier to prepare before someone asks than during the diligence period.
Sources
- OWASP Foundation (secure development and common vulnerability guidance): https://owasp.org/
