The Role Of Technical Due Diligence For Software Development Companies

Software Development

Software Development

Product development is a multi-layered and complex process that requires effort and sufficient resources to bring the idea to life. The MVP stage is especially critical in development. It is here that startups need to attract investments to make the product successful and achieve their business goals.

However, before investors become interested in the project and decide whether to invest money, they should ensure the product is reliable. And it is where technical due diligence services come into play to give an independent project assessment.

Let’s take a closer look at what tech due diligence is and why it is important.

What Is Tech DD

By its concept, technical due diligence is an independent verification of the technical condition of the project, as well as its strengths and weaknesses.

This procedure is designed to evaluate the quality of the product, its code, and the consistency of decision-making processes. Also, technical due diligence assesses the project’s related risks, transparency, and prospects. It helps to give investors an independent assessment of whether they should invest money in your product.

Thus, the success of the project itself largely depends on the success of the technical due diligence procedure.

Why Tech DD Is Important

One of the main challenges for startups in the product development process is unpredictable changes that require developers to react quickly to make adjustments. Because of this, the initial concept and plan can change dramatically, which carries risks for the entire project. That is why it is often critical that the existing product matches the original idea for many investors. And here, along with due diligence, end-to-end digital transformation services come in handy to carry out the entire process of developing and launching the product as intended.

At the same time, technical due diligence can analyze the risks and allow investors to evaluate the product from the inside to understand better its idea and uniqueness.

This procedure has several advantages for startups as well because, with this approach, developers can further analyze the pros and cons of their product, as well as the strengths and weaknesses of development.

It is worth conducting technical due diligence regularly to create an effective plan for further actions and find solutions to emerging problems in the development process.

Reasons For Tech DD

Operational processes, organizational structures, and project capabilities all play a role in the successful delivery of a product. Thus, technical due diligence is perfect for a startup to achieve its business goals.

Among the main reasons why companies should conduct tech DD are:

Customer Retention

Even the most promising and unique idea can fail due to poor implementation. Since technical due diligence focuses on a thorough project analysis from all angles, it helps to notice the problem in time and fix it.

Thus, a well-functioning technical platform around which the product is built improves the user experience, making the product convenient and friendly for customers.

Therefore, if a company satisfies the needs of consumers and ensures the continued viability of its product, the chances of customer retention increase significantly, which also naturally makes the project more interesting for investors.

Data Management

Another reason why companies should conduct technical due diligence concerns data management. Given digital transformation, the collection, analysis, and use of data are critical to the success of a product. Thus, a company needs to be able to manage data in the best possible way.

In addition, it is crucial for investors how data is processed by the system (encryption methods, storage policy, analysis of customer data, etc.).

Today, many industry standards and requirements are applied to data management, so violations of the rules can have financial and reputational risks, which can alienate investors from your project.


One of the problems developers often encounter is that not all bugs and errors in the codebase can be identified and fixed. And this carries hidden risks, especially when it comes to product scaling.

Thus, the technical due diligence procedure can become an additional censor to check the code to find and fix bugs, ensuring that the product users receive is stable, high-quality, and high-performance.


Launching a product that contains vulnerabilities and can be hacked due to a cyber attack is perhaps the worst thing to happen, as it will instantly “kill” even the most promising and innovative product.

That is why another reason to do technical due diligence is to ensure the platform’s security. It is an especially crucial task to check and obtain a safety assessment before the investment stage.

Tests, threat modeling, and vulnerability scanning of the system help to identify fundamental problems at the initial stage and fix them, thereby avoiding possible risks and reputational losses.

Key Person Risk

The last reason is key person risk. It is worth noting that this issue is more important for investors than organizations. However, for startups, especially those with a small staff, it is one of the factors to pay attention to.

The fact is that investors are also interested in all kinds of associated risks in addition to the innovativeness and prospects of the product. And among the “stop signals,” they can find the key person risk.

The main reason is that in small companies, the bulk of knowledge and skills can often be possessed by 1-3 people. Thus, if one of the developers decides to quit at some stage of development, this can lead to the failure of the entire project and, accordingly, to the loss of the investor’s money.

Thus, the technical due diligence procedure further helps startups implement plans to retain key people and mitigate the consequences if they leave.