What to Include in a Technical Due Diligence Report for Investors

What to Include in a Technical Due Diligence Report for Investors

Answer capsule: A technical due diligence report for investors needs to cover system architecture and scalability, code quality and technical debt, security posture and compliance readiness, infrastructure and operational practices, team structure and key-person risk, third-party dependencies, and an honest risk summary with remediation estimates. Every section needs specific findings. Not ratings. Not checkmarks. Findings.

Most technical due diligence reports fail investors before anyone reaches page two. And honestly, the culprit is almost always the same thing: a report written to impress rather than inform. A founder hires someone to write it, that person produces something that sounds thorough, and the investor receives a document full of green checkmarks and vague reassurances that the codebase is "well-structured."

That kind of report gets investors hurt. Full stop.

Sophisticated investors, particularly those writing checks above $2M, now expect technical due diligence to function as a genuine risk assessment. They want to know what will break, what it will cost to fix, and whether the team can actually scale the product. If your report does not answer those three questions clearly, it has not done its job. It has just created paperwork.

The sections below reflect what a credible technical due diligence report actually needs to contain. These are not checklists. Each section requires real findings grounded in evidence.

Start With the Architecture, Because That's Where Everything Hides

So where do you actually begin? Most reviewers start with architecture, and I think that instinct is right, because this is where the most important signals live and where the most damage gets papered over.

The architecture section should document what the system is actually built on, not what the pitch deck claims it is. That means naming the specific technologies: the database (PostgreSQL 15, MongoDB Atlas, Aurora), the application framework, the hosting environment (AWS, GCP, on-prem), how the major components connect. Specific nouns, not category descriptions.

More importantly, it needs to answer the scalability question with specifics. Not "the system can handle growth." Rather: at current load, what are the bottlenecks? Has the system been load-tested? What happens at 10x current user volume? One common finding in SaaS due diligence is a product built on a single-instance relational database with no read replicas and no caching layer whatsoever. That is not a red flag you can bury in a footnote. That is a flag you put on the cover page.

And look, the architecture diagram should be reconstructed by the reviewer, not lifted from the company's internal docs. Founders tend to document the architecture they intended, not the one that actually shipped. Those two things are often surprisingly far apart.

Code Quality and Technical Debt (Translated Into Money)

Code quality is notoriously hard to summarize for non-technical investors, which is exactly why most reports handle it so poorly. Personally, I think this is where a lot of review firms take the easy way out.

A credible assessment combines automated tooling with human review. Tools like SonarQube, CodeClimate, or Semgrep can surface duplication rates, cyclomatic complexity, and known vulnerability patterns at scale. Human review fills in what the tools miss: whether the codebase follows consistent patterns, whether the test suite is meaningful or essentially decorative, and whether the code reads like something a new engineer could actually work in productively.

The technical debt section should be expressed in business terms. Not just engineering ones. "The payment module has no unit tests and contains three deprecated API integrations" is more useful to an investor than "test coverage is 34%." Estimate remediation costs in rough engineering weeks. Investors can price risk when it has a number attached to it. When it does not have a number, they just feel uneasy, which is worse for everyone.

To be fair, there is a real difference between debt and deliberate simplification. Early-stage companies make tradeoffs. A founding team that consciously skipped internationalization to ship faster is not a liability in the same way a team that never set up error monitoring is. The report needs to draw that distinction clearly, because treating every shortcut as a crisis makes the whole document unreliable.

Security Posture and Compliance Readiness

This section matters more now than it did three years ago. Not a little more. A lot more.

Investors in regulated industries, particularly FinTech and HealthTech, are now treating security gaps as deal-blockers rather than post-close remediation items. I keep thinking about this shift, because it happened faster than most people expected.

A technical due diligence report should document how authentication is implemented and whether secrets management exists, whether data at rest and in transit is encrypted, what access controls exist internally, and whether any known CVEs are present in the dependency stack. Each of those is a separate question with a real answer.

For companies pursuing SOC 2, HIPAA, or PCI compliance, the report should note the current distance from certification. A company six weeks from SOC 2 Type 1 is in a very different position from one that has never engaged with the process at all. Different risk profile. Different capital requirement. Different closing conversation.

If a penetration test has been conducted, the findings and remediation status belong in this section. If it has not been conducted, that absence is itself a finding. Not a suggestion. A finding.

Infrastructure and Operational Practices (How They Actually Run the Thing)

Fair question: why does operational practice belong in a code review? Because how a company runs its software is often more predictive of future problems than the software itself. You know how that goes.

The infrastructure section should cover where the application is hosted and how environments are managed, whether infrastructure is defined as code (Terraform, Pulumi, CDK) or managed manually, how deployments happen and how frequently they occur, and what monitoring and alerting is actually in place.

A company deploying manually to a single production environment with no staging, no rollback capability, and no alerting is carrying significant operational risk regardless of how clean the code is. These are not minor concerns. Operational failures kill customer relationships and consume engineering time that should go toward product development.

Incident history is worth documenting if accessible. And honestly, a team that has experienced and recovered from production outages often has better operational instincts than one that has never been tested. Scars are data.

Team Structure and Key-Person Risk

This section makes some founders uncomfortable. Good. That discomfort is a reason to include it, not to soften it.

Key-person risk is real and quantifiable. If one engineer holds institutional knowledge of the entire data pipeline and has no documentation, no backup, and no succession plan, that is a material risk. Investors need to know that before closing. Not after.

The team section should document how many engineers are on staff and what their tenure is, how knowledge is distributed across the team, whether the founding CTO is a builder who will scale or a builder who will eventually need replacement, and whether critical systems are owned by contractors or full-time employees. Those are distinct scenarios with different implications.

Contracting structures matter here. A company built substantially on offshore contractors with no internal engineering leadership is a different risk profile than one with a small but senior internal team. My advice? Flag both structures explicitly and let the investor weigh the tradeoff rather than making that judgment call for them.

Third-Party Dependencies and Vendor Risk

Modern software stacks run on dozens of third-party services. That is normal. The question is whether anyone has actually thought about what happens when those services fail or change their terms.

The dependencies section should enumerate critical APIs the product cannot function without, any single-vendor dependencies that create concentration risk, licensing obligations on open-source components (particularly anything under AGPL or similar), and any dependencies that are unmaintained or approaching end-of-life. That last one gets skipped more often than it should.

Stripe, Twilio, and AWS are not concerns. A product that depends on a niche data provider with no documented SLA and a history of outages is worth flagging. So is a codebase built around a library whose last commit was in 2021. Not automatically fatal. But worth naming.

The Risk Summary Is What Investors Actually Read First

And most reports write it last, as an afterthought. My take? That is backwards.

The risk summary should organize findings into tiers: critical risks that could impair the business or block a transaction, significant risks that require real investment to resolve, and minor risks that are normal for a company at this stage. Three tiers. Every finding goes into one.

Each critical and significant risk should include an estimated cost to remediate, expressed in time and money. "Rebuilding the authentication layer to remove hardcoded secrets will require approximately three to four weeks of senior engineering time" is useful. "Security improvements are needed" is not useful. It is just noise dressed up as analysis.

The roadmap should also note which risks are pre-close priorities versus which can be addressed post-close with appropriate capital. Investors do not need a perfect system. They need an honest picture of what they are buying and what it will actually take to get it where it needs to go. That is the whole point of the exercise.