Before You Launch: 5 Steps to Technical Due Diligence

You’ve developed your tech product to the point it is ready for a Proof of Concept. You are about to raise a venture capital round. You’ve assessed its market potential. Now it’s time to be ready for VCs to conduct a deep dive into its technical infrastructure. Here is a starting list of five questions.

1. Is the product built using inhouse or outsourced employees?

Any product begins as a concept, with employees bringing that concept to life. Ask these questions about the development team:

  • How are the developers approaching code quality?
  • Are technical specifications in place?
  • What agreements exist regarding ownership of the IP and outsourcing?

2. How agile is the product? (speed versus reliability)

Tech products work to strike a balance between speed and reliability. Investigate these issues more thoroughly to determine where a particular product falls on that spectrum:

  • Are the developers using version control?
  • Does version control, if used, allow for rapid deployment of product changes?
  • Are the developers using an open-source tech stack, and if so, what open source licenses are used?
  • Are the tech stack and programming languages supported by a large community?

3. How is the product monitored?

All products, tech and otherwise, run the risk of not performing in the real world as imagined in the lab. Since close monitoring and response will determine the direction of the product’s “shelf life,” examine these issues closely:

  • How is the product being used in the real world? What understanding of this issue have developers reached?
  • Are tools that track and analyze beta users and segments, being incorporated?
  • If the product falters, how quickly can the team respond?

4. How has the development team approached compliance and security?

A non-compliant or unsecured tech product raises questions about risk for the user, which translate into risks for the owners/developers. Examine the product’s risk profile carefully by asking the right questions:

  • What information (personal or otherwise) and metadata are collected, used, and recycled by the product, and where is it stored?
  • What level of security does the product need? Is that security in place?
  • Does the team possess the necessary security expertise?
  • What are the risks of an adversary gaining access to this data? What’s in it for them?

5. Is the product ready now?

Understanding the readiness of the product for market will aid in analysis of potential costs, along with potential risks of failure. Assess the product’s readiness in a range of scenarios:

  • How scalable is the product at this time?
  • What are the plans to make it scalable?
  • Let’s assume the product hits the #1 rank on a major trade publication tomorrow… Is the team ready to handle that?

Professional legal guidance can assist the investor in asking – and answering – tough questions regarding due diligence. Contact our office to begin the evaluation, or for help at any stage of the process.

 

Picture of Michael Kimball, Esq.

Michael Kimball, Esq.

Mike Kimball offers practical, timely, and economical legal solutions that move projects along and allow you to focus more on your core business objectives. He has years of experience partnering with companies ranging from Silicon Valley startups to firms in aerospace, biotech, construction, and many more. Mike’s in-house experience includes Yahoo!, Krux Digital (acquired by Salesforce), and Commerce One. He has worked on transactions with Eurostar, Red Bull, Major League Baseball, NASDAQ, Goldman Sachs, Liveramp, Amazon, and NASCAR.
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