How to avoid unexpected technology setbacks in investment decisions

When it comes to investments, certainty is everything. As capital continues to flow into high-growth, tech-led businesses, investors are under increasing pressure to make decisions quickly, but also wisely. Amid this market momentum, one thing that can derail a promising investment opportunity is technology.

Unstable infrastructure, poor quality code, unknown security risks, and technical shortcomings can all lead to costly delays, post-deal disruption, or reduced long-term value. 

Which is why more investment firms are turning to Technical Due Diligence (TDD) as a critical part of decision-making processes… 

Why does TDD matter?

Delving far beneath the surface-level scan of a company’s tech infrastructure, Technical Due Diligence highlights how the technology functions, how well it aligns with the business model, and whether it can truly support future growth.

IDS has supported investors across numerous sectors – from FinTech and Healthtech to AI, e-commerce and security – to identify red flags and untapped opportunities hidden in the code, infrastructure, and systems.

In our experience, even the most promising firms are held back by perfectly avoidable technology issues. Here are some of the more common issues we encounter:

1. Outdated or fragmented tech stacks. Built on legacy systems or poorly integrated platforms that can’t keep up with demand.
2. Low code quality. Poorly written or undocumented code that hampers agility and makes future development difficult.
3. Security vulnerabilities. From inadequate authentication controls to unpatched software, these risks can delay deals or attract regulatory scrutiny.
4. Scalability issues. Infrastructure that works for 10,000 users might collapse at 100,000 without a major overhaul.
5. Poor alignment with business goals. Tech that doesn’t support long-term strategy or market needs.

A UK-based investor approached IDS Group to support a potential £4 million investment in a cutting-edge robotics and AI platform. Our audit uncovered a technically complex and unique solution — but also flagged significant challenges. These included the use of a single-server architecture, security vulnerabilities, and non-compliance with GDPR. Our insights helped the investor proceed with eyes open, which supported the firm’s long-term strategy and led to further collaborations with IDS.

But in some cases, our findings lead to a different decision altogether.

The company commissioned a technical due diligence review from IDS to understand scalability, security, and international readiness. Our audit revealed deep technical debt, multi-tenancy risks, and limited scalability — and the client ultimately saved over £500,000 by abandoning the acquisition.

What do we look for in a technical due diligence assessment?

1. Is the infrastructure modern, modular, and cloud-ready? Are there bottlenecks that could slow performance or increase cost?
2. Is the code clean, maintainable, and version-controlled? Is there a consistent framework and documentation?
3. Are there robust security policies and protections in place? Is the platform compliant with GDPR, ISO, and other relevant regulations?
4. Can the system handle rapid growth in users or data? Are there plans — and the ability — to scale both horizontally and vertically?
5. Are development and deployment practices structured and auditable? Are there clear responsibilities and access controls in place?

By identifying technical strengths and areas for optimisation, a thorough TDD can inform a smarter post-deal roadmap. From infrastructure modernisation to improved DevOps practices, the insight gained can guide both immediate actions and long-term value opportunities.

In the case of the robotics/AI platform, while key risks were flagged, IDS also identified high levels of technical innovation and market differentiation. The platform’s complexity, while risky, also represented a significant barrier to entry for competitors — offering strong strategic benefits.

Ultimately, in such a fast-paced market, the best kind of investment is an informed one. Technical due diligence helps investors uncover the full story behind the software — identifying both potential risk and reward.