For modern investors, the stakes are too high for a low-level, tick-box approach to technical due diligence. Of course, all investments come with a degree of risk. Around 90 per cent of all startups fail for varying reasons. But while investors try to limit this risk by carrying out due diligence on finances and company structure, they can often fail to pay enough attention to technology.
In the long run, the strength of a company’s technical infrastructure impacts everything – from its ability to scale to long-term valuation. However, too many investors still rely on low-level technical audits. These often fail to uncover real, genuine technological threats to growth.
Without an in-depth technical due diligence process, these risks can remain hidden. For example, software may pass a compliance checklist – but struggle with scalability, security or code structure. What does that potentially mean for you as an investor? Unexpected costs, operational failures and reduced ROI.
Put simply, low-level tick-box approaches to technical due diligence are not enough. In this blog, we’ll see how stronger technical due diligence can help you de-risk future investment decisions.
Why investors underestimate technology risk
Technology is key to modern business growth. But while tasks like financial due diligence are done as standard, the same level of scrutiny is not always applied to technology. This can create a costly blind spot in investment decisions.
When only carrying out low-level technical due diligence, investors might fail to ask vital questions like the following:
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- Can the technology support increased demand without overhauls?
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- Are vulnerabilities putting customer data and compliance at risk?
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- Will outdated infrastructure increase costs or slow down development?
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- Can the technology adapt to changing business requirements?
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- Does the system rely on unsupported or legacy technologies?
Ignoring these questions can mean an incomplete picture of the overall investment – potentially threatening or delaying the timeline for returns.
What are the limitations of tick-box technical due diligence?
Tick-box technical due diligence focuses on the surface-level. It follows a generic formula, checking that a product meets regulatory requirements. But often, it fails to measure commercial viability. This means it could potentially:
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- Miss important system security flaws beyond basic penetration testing
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- Ignore architectural limitations that limit the flexibility to scale
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- Fail to identify dependencies that bring risk and future expense
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- Overlook poor code that might cause instability, slower innovation and costs.
Instead, investors can choose a commercially focused technical due diligence process to assess how well the technology supports their objectives.
A better approach to technical due diligence
For a more detailed approach to technical due diligence, investors can work with a commercially aware partner. IDS Group provide comprehensive technical due diligence – evaluating technology as a long-term strategic asset rather than just a compliance requirement.
Our approach includes various steps, checks and recommendations.
1. Risk-focused technical audits
First, we analyse scalability, security and maintainability. This gives a full picture of technical risk. It includes an assessment of technical debt, infrastructure resilience and security posture to highlight risks that may impact business performance and investment success.
2. Real-world security testing
Next, our penetration testing services go beyond just standard vulnerability scanning. We’ll think like a hacker would – simulating real-world cyber attacks to expose risks that low-level assessments can miss. This prepares companies for actual security threats, with a remedial roadmap to protect long-term value.
3. Code and system architecture review
Then we dig into the software. Factors like code quality, technical dependencies and product architecture all influence long-term viability. For example, a strong codebase allows for rapid iteration, while technical debt and legacy code create (potentially expensive) barriers. Our reviews show where technology investment is needed to achieve future scalability.
4. Commercial alignment and roadmap evaluation
Then, we map technology to your business strategy. Investors get insight into whether a product is future-proofed – or if it requires significant redevelopment. Our assessments also give a realistic view of investment risks and opportunities.
5. Post-audit remediation and support
Identifying risks is just the first phase. We work with investors, CTOs and product teams to develop a roadmap for remediation. This means investment decisions are based on actionable, data-driven, real-world insights rather than just assumptions.
The benefits of strong technical due diligence
So, what does this mean for you as an investor? Using a more strategic approach to technical due diligence can help you:
- Identify risks early, then negotiate based on real technology assessments
- Avoid costly infrastructure overhauls and security fixes
- Make sure the technology supports scaling and product expansion
- Understand security vulnerabilities, regulatory compliance and infrastructure gaps before they impact business continuity.
Overall, these help you avoid surprises and invest with trust.
Let's discuss your technical due diligence strategy
While standard tick-box technical audits give investors some important information, they often don’t paint the whole picture. They might confirm compliance but fail to spot weaknesses that could affect investment outcomes.
At IDS Group, we provide technical due diligence with a commercial focus on maximising your investments. We’ve helped many investors identify risks and evaluate technology considering its long-term impact on business growth.
Contact us to see how we can help de-risk your technology investments.