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Tech Due Diligence: Uncovering Value and Mitigating Risks

The Anatomy of Tech Due Diligence

Tech Due Diligence Anatomy|

What Is Tech Due Diligence?

Tech due diligence serves as a critical exploration of a potential company, or target, to evaluate their technology stack, products, or services against a specific investment thesis. This process aims to assess risks that might obstruct the investment goals and uncover any potential surprises that could affect the investment's viability. The ultimate objective is advising investors on the feasibility of their investment thesis, identifying key risks, and suggesting mitigation strategies.

Tech due diligence outcomes are broadly categorized into:

  • Not a viable investment based on the thesis

  • A good investment with identifiable risks requiring mitigation

  • An excellent investment with opportunities for optimization

Effective tech due diligence not only assesses immediate risks but also identifies optimization opportunities that can enhance efficiency, reduce costs, and positively impact EBITDA and exit multiples. A robust tech due diligence is data-driven, leveraging quantifiable benchmarks that contribute to a comprehensive value creation cycle.

What Is Inside A Tech Due Diligence?

The most thorough tech due diligence adopts a pragmatic and strategic 360-degree holistic approach, providing a comprehensive overview that facilitates a more accurate assessment. Essential areas of focus in tech due diligence include:

  • Business and technology strategy

  • Product roadmap

  • Software architecture

  • Code health

  • Team capabilities

  • Deployment setup

  • IT infrastructure

  • Security measures

  • Leadership assessment

Non-core areas, which may vary based on the target's situation, include product portfolio analysis for companies with multiple products, professional services evaluation for implementation-focused businesses, or specialized assessments like artificial intelligence or blockchain for companies leveraging emergent technologies.

The tech due diligence process begins with an evaluation of the technology and product business strategy, moving on to assess leadership, team capabilities, and identifying any skill gaps. It then delves into software architecture, cloud infrastructure, and code health, concluding with a holistic review of IT infrastructure, development lifecycle, tools, quality approaches, and product management practices. Security is a cross-cutting concern, integrated into every assessment area.




About Tech Due Diligence

Software Technical Due Diligence, often referred to as tech due diligence, embodies the comprehensive evaluation of a target company's technological capabilities and risks. While similar to technical due diligence and technology due diligence, it is distinct from IT due diligence, which targets tech-enabled, rather than software-centric, companies.

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Tech Due Diligence Infographic


  • Attend RingStone Academy: Our team shares insights and experience about technology best practices, technical due diligence practices, software architecture, AI, cloud, and security topics.

  • Custom Education Sessions: We offer sessions to help deal with teams and operating partners in Private Equity with technology best practices for technical due diligence execution and what to look for in the early exploration stages. Contact us to discuss availability.

  • Other Resources

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