Tech for Founders: What You Need to Know as a Founder

About this episode

As a founder, you'll eventually face a critical hurdle: Tech Due Diligence (Tech-DD) during funding rounds. What initially seems like a technical detail can determine the success or failure of your funding round. Chris Philipps from Philipps & Byrne explains what really matters.

What is Tech Due Diligence and when does it become relevant?

Tech Due Diligence is the systematic review of your technical infrastructure by potential investors. While it plays a minor role in early funding rounds, it becomes a critical success factor from Series A onwards. Investors want to understand whether your technology is scalable, secure, and future-proof.

The review covers various areas: from your platform architecture to security aspects and the organization of your tech team. Investors scrutinize whether the technical promises from your pitch deck can actually be delivered in reality.

Best Practices for a convincing Tech organization

Successful startups are characterized by seamless organization between business, product, and technology. Concretely, this means your tech decisions should always align with your business goals. A flexible architecture is essential to quickly respond to new market requirements and drive innovation forward.

Particularly important is a product development process that leaves room for original ideas. Rigid structures can hinder innovation – a fatal mistake in the fast-moving startup world.

Typical investor questions in Tech-DD

Investors ask typical questions during Tech Due Diligence that you should prepare for:

• –Leadership Team: Who leads your tech team and what experience do these people bring?
• –Technical Leadership: How is your tech organization structured and who makes the important decisions?
• –Platform: How robust and scalable is your technical infrastructure?
• –Scalability: Can your technology keep pace with planned growth?
• –Security: How do you handle data protection and IT security?
• –Pitch Deck Fulfillment: Can your technical promises actually be delivered?

These questions aim to get a complete picture of your technical maturity. Honest and well-founded answers are more important here than perfect solutions.

Tech Debt isn't automatically bad

A widespread misconception among founders is that technical debt is fundamentally problematic. That's not necessarily true. In early startup phases, it's completely normal and even sensible to implement quick solutions to shorten time-to-market.

What's crucial is that you're aware of the technical debt and have a plan for how to gradually reduce it. Investors understand that perfection in early phases is neither possible nor economically sensible.

Timing and preparation are crucial

Chris Philipps recommends getting feedback from experts three to six months before a planned funding round. This lead time makes it possible to identify potential problems early and solve them systematically. An external perspective can uncover weaknesses that are overlooked internally.

Tech Due Diligence has a direct impact on your company's valuation. A well-prepared Tech-DD can strengthen your negotiating position, while deficiencies can lead to valuation discounts or, in the worst case, cause the funding round to fail.

Keep important metrics and KPIs in focus

Beyond qualitative assessment, quantitative metrics also play an important role. These include performance indicators of your platform, development speed, code quality, and security metrics. You should continuously monitor these KPIs and optimize them when necessary.

Conclusion: Technology as a strategic advantage

Tech Due Diligence is more than just a hurdle in the funding process – it's an opportunity to demonstrate your technical excellence. With proper preparation and honest handling of existing weaknesses, Tech-DD becomes a strategic advantage in your funding round.

Technology should never be viewed in isolation, but always in the context of your business strategy. Successful founders understand that excellent technology and clear business goals must go hand in hand.