Technical Due Diligence

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I've been aiding investors to conduct their Technical Due Diligence to asses the risk of investing into Startups.

When conducting a Technical Due Diligence (DD or TDD), the question I am trying to answer is:
What are the deal breakers in this investment?
To answer this, I need to identify:
What does the investor consider a dealbreaker?
What are potential dealbreakers they may not even realize?
What is the investors investment thesis?
What are the potential dealbreakers in this company?
Is there anything specific you'd like me to investigate?
How would they like me to deliver findings?
Goals of a Technical Due Diligence
Identify risks for Investors
Find Deal Breakers, and Red Flags
Sub Goals
Can the tech team deliver on the product roadmap?
What is the product roadmap?
Caveats
A TDD can also turn into a Product Due Diligence
How well can the tech team support their product?
Be prepared to discuss about product roadmap if there are no technical problems.
Timeline
When I am connected with a potential company, I provide a timeline:
Call:
30 Minutes max
Introductions
Explain the Technical Due Diligence process
Learn a bit more about the company
Explain any documentation that is required to fill
Figure out a single point of contact
Onsite:
1-2 days
Demo of the product
Helps to inform architecture and infrastructure questions
Demo of the internal tools
Product roadmap
Individual meetings with heads of different product. Departments
30 minutes max
Architecture review
Understanding Development process
Individual meetings with senior leadership
Members: CTO, CPO, senior engineers
30 minutes max
Join release/deployment process
ERD of databases
Understand data structure
Let me know if any meetings are with remote employees
I can schedule my time better knowing so
Findings
I categorize findings into two areas:
1.Red Flags, Problems, Issues
2.Deal Breakers, Show Stoppers
Red Flags, Problems, Issues
If I find any of these, for the most part, I find these as a "pass". I do note them down, but everything has a problem. I only escalate these findings into "Deal Breakers" if upon diving a little deeper into it, you discover deep fundamental problems.
For example:
Everyone has technical debt, but does the technical debt slow them down?
Deal Breakers, Show Stoppers
As the name suggests, these are the reasons why the deal should not be made. These are the risks that an investor has to be really aware of when investing.
Examples:
They are doing something illegal
They are outsourcing their work
They don't have the technical ability to deliver on their roadmap
They claim to be doing something they are not actually doing, or don't have the competency to
They are investing into new technology, they are not familiar with
"Deal Breakers" may not stop the deal, but do have a discussion with the investor about the investment thesis.
Are you investing into it being a profitable business?
These business may still be making money.
Are you investing into the company into building their technical expertise?

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Outline

Goals of a Technical Due Diligence

Red Flags, Problems, Issues

Deal Breakers, Show Stoppers