What is Technical Due Diligence and How Do You Implement It?

A company’s platform of technology can serve as a key advantage over its competition. With the rise of tech-based companies in recent years, emphasis on examining its technology has become more important than ever in the due diligence process.

Defining Technical Due Diligence

When performing due diligence, the user interface, the features and the underpinnings of the technology are important. No matter how sleek and impressive a platform might be, a company won’t benefit from technology that doesn’t address problems or that people refuse to use. Therefore, emphasis should be placed on the execution risk of developing the technology and bringing it to the market.

Due diligence should address these points:

  • Who is responsible for building the product? Are they capable?
  • In what stage of development is the product? What steps must be performed next?
  • What infrastructure has already been implemented? What trade-offs were made? How will these decisions affect risk or necessitate change in the future?
  • An examination of past development and a course for the future should be included

Due diligence should also be able to answer these two primary questions:

  • Speed – how quickly can we deliver the product to customers?
  • Reliability – will this product work on a large scale?

In addition, consider all of the metrics with a special regard for this near-universal truth: Those who push a reliable product to market first, will earn the best odds of success. Therefore,

  • Can the current team meet these goals?
  • Does the plan balance the need for speed with customer demand for reliability?
  • Does the development plan include user feedback, so that the end product meets user needs without weighing itself down with bloated, unnecessary, or outdated features?

Implementing Due Diligence

At its core, the goal of technical due diligence is to determine whether the current team is capable of building the product as necessary for the intended market. The end result of technical due diligence will be a determination that the product falls into one of the following categories:

  • Sound: the team has developed a solid infrastructure, has clearly delegated responsibilities, can deliver a reliable product in good time, and documentation backs up these claims.
  • Workable: significant development still needs to be done, but a reasonable roadmap can be drawn and the team is capable of meeting goals.
  • Unworkable: Lack of user testing; no documentation of bugs; inadequate coding standards; Dev team is frequently in “firefighting mode”; lack of monitoring or alerts.
  • Uncharted territory (extreme caution is advised): Technical knowledge and infrastructure are lacking, such that it’s unlikely the product can be delivered to market as needed without extensive reworking.

Technical due diligence is a complicated process, but legal guidance exists to help navigate uncharted waters. 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.