What’s Under the Hood? The Power of Technical Due Diligence
When it comes to investing in a promising startup, many focus on the surface: the polished marketing, the impressive pitch, and the exciting product. But what's happening under the hood? This is where technical due diligence (TDD) comes in—an often-overlooked but crucial step to assess the true potential of a company.
In this post, we’ll explore why technical due diligence matters, how it can help investors and entrepreneurs avoid costly mistakes, and how it aligns with the 10 pillars of NorthBound Advisory for building a scalable and sustainable business.
What is Technical Due Diligence?
Think of TDD as a deep dive into the company’s tech stack. It’s like checking the engine of a car before you buy it: while the exterior might look great, you need to ensure the inner workings are solid. For investors, TDD helps evaluate risks before committing funds. For entrepreneurs, it’s an essential self-assessment tool to optimize your tech before seeking investment or scaling operations.
Why TDD Matters: Avoiding Nasty Surprises
Imagine investing in a company with a shiny product and impressive growth, only to find that its tech foundation is riddled with technical debt—a tangled mess of unscalable code and poor architecture. This can lead to performance issues, security breaches, and slower growth. Worse, it could cause system failures, data leaks, or even a loss of customer trust.
By identifying such problems early, TDD helps prevent these “nasty surprises” from becoming costly, reputation-damaging disasters.
What Does TDD Cover?
Technical due diligence involves reviewing the key components that make up a company’s technology and operations. At its core, it’s about understanding whether a company’s tech can keep up with its ambitions. It’s like looking under the hood of a car to see if the engine, brakes, and tires are in good shape. In the tech world, this means checking the software and systems that run the company, making sure everything is well-designed, secure, and scalable.
TDD also looks at how well the company communicates and collaborates internally, ensuring teams are aligned and working efficiently. It checks whether the company has the right team and leadership in place to support growth, and whether it’s managing its financial resources wisely to avoid unexpected costs.
NorthBound Advisory uses 10 Pillar Model to explore the Technical Due Diligence of a Startups Product Development Organization
TDD for Investors and Entrepreneurs
For investors, TDD is a critical tool to assess whether the company has a solid tech foundation and is prepared for future challenges. It helps identify risks that might not be visible at first glance but could derail growth or lead to significant losses.
For entrepreneurs, TDD is equally valuable. Conducting TDD on your own company before seeking investment can highlight areas of improvement, making your business more attractive to potential investors. Think of it as a self-assessment to ensure that your tech is ready for prime time.
Conclusion: Going Beyond the Surface
Whether you're an investor or an entrepreneur, technical due diligence is about going beyond the flashy surface and really understanding the technology that drives success. By using TDD to assess the 10 key pillars of your company, you can identify hidden risks and optimize your operations for growth.
At NorthBound Advisory, we believe that strong technical foundations are key to success. By addressing potential issues early and ensuring alignment with the 10 pillars, you can make smarter, more informed decisions—whether you’re investing or building your business for the future. The foundation matters—make sure it’s solid.
Podcast
Checkout a 5 minute Podcast from Rick and Amanda the value of Technical due Diligence for Founders and Investors
