This document provides guidance from a Chief Technology Officer's perspective on conducting technical due diligence for startups and investments. It discusses what technical due diligence involves, including identifying assets, risks, leadership, team skills, and technology scalability. The CTO recommends being prepared with documentation, demonstrating an understanding of investors' expectations, and knowing one's own company story. Key topics to review include products, architecture, processes, and more. Potential red flags and sample questions are also provided to help companies survive the technical due diligence process. Overall, the document aims to help technology founders and leaders effectively collaborate and address any issues that may arise during an evaluation of their company's technical strengths and weaknesses.

1. Tech Due Diligence
From a CTO’s Perspective
Chris Philipps
cphilipps@me.com
powered by
(AKA: Survival Tips for the Wilderness)

2. Chris Philipps
• Tech Advisor for Startups and
Investors
• Working in Tech since 2000
• Interim CTO since 2010
• Tech Due Diligence since 2010

3. Chris Philipps
• Roles:
• “CTO under DD”
• DD reviewer
• Sparring partner for CEOs &
CTOs (DD test-runs)
• Performed dozens of DDs
from 100k seed over 40M
Series C round to >300M
acquisitions

4. What About You?
• Who of you is
• CEO?
• CTO?
• Investor?
• Who is currently (or soon) in a
funding process?

5. A Common Issue
Me as “CTO under DD” in 2010:
• dramatically unprepared
• no clue what’s going on
• we probably got the funding
*despite* me, not because of
me
…and so are many CTOs
http://2.bp.blogspot.com/-epF_a-sEMrw/TyqZHHJJUII/AAAAAAAAHME/
hAJMGKTwt88/s1600/surprised-monkey-national-geographic.jpg

6. What is a DD (and what isn’t)
• A DD is a general health check
• Identification of assets and risks
• Evaluation of
• Leadership
• Team
• Technology
http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg

7. A DD is Highly Collaborative Work
• A first test for
• common understanding
• trust
• dealing with conflict
• BONUS: It is the most honest and
thorough feedback you can get
http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg

8. It is NOT: *
• hide-and-seek
• us against them
• a show
* at least it shouldn’t be. Well, not entirely.
http://www.amusingtime.com/images/09/funny-joker-monkey-picture.jpg

9. • No standard for Startup Tech DD’s
(yet)
• Very different approaches
http://www.amusingtime.com/images/09/funny-inspection-of-monkey.jpg
Please Note:

10. Different Stages of Funding
http://awsassets.wwfmz.panda.org/img/original/rhinos_1.jpg

11. Different Stages of Funding
Stage: Seed / Angel
Biz Focus: Build
DD Focus: Potential
Stage: Series A,B,C
Biz Focus: Grow
DD Focus: Scalability, ability
to adapt quickly
Stage: Series D
Biz Focus: Expand
DD Focus: Maturity
Stage: IPO
?

12. “But how the F*** do I survive a DD?”

13. Do You Know Your Investors’ Expectations?
• Ability to grow and scale
• Ability to change
• Leadership and team skills
• Risk assessability
https://nationalzoo.si.edu/sites/default/files/animals/africanlion-005_0.jpg

14. Do You Know Your CEO’s Story?
• What is the story your company wants to
raise money with?
• Is it a “growth story”? Or focussing on
profitability?
• What is your USP?
• Are you a Tech or a Retail company?
https://shechive.files.wordpress.com/2015/12/kittens-doing-very-
human-ish-things-15.jpg?quality=100&strip=info&w=600

15. The First Contact
• It already starts with the intro
• It is not only about WHAT but also
about HOW
https://shechive.files.wordpress.com/2015/12/kittens-doing-very-human-
ish-things-15.jpg?quality=100&strip=info&w=600

16. Have Your Documents Ready
Basics:
• Tech Strategy
• Product Roadmap
• Hosting Diagram
• Software Architecture
• Technical Debts
• Org Chart
Don’t forget:
• Key Metrics
• SLAs
• IP Rights in contracts
• Software Licences
http://i.dailymail.co.uk/i/pix/2014/10/07/1412674620644_wps_21_Pic_By_HotSpot_Media_CHEE.jpg

17. Recap: Main Questions
• Is the company able to grow / scale?
• Is the CTO (CPO) able to provide great
leadership?
• Is the team motivated and highly
skilled?
• Are they able to (fail and) learn quickly?
• What are main complexity drivers?
• What are major challenges and risks?

18. Review Topics:
• Company view

19. Review Topics:
• Company view
• Product

20. Review Topics:
• Company view
• Product
• Technical leadership

21. Review Topics:
• Company view
• Product
• Technical leadership
• Development process

22. Review Topics:
• Company view
• Product
• Technical leadership
• Development process
• Hosting

23. Review Topics:
• Company view
• Product
• Technical leadership
• Development process
• Hosting
• Deployment

24. Review Topics:
• Company view
• Product
• Technical leadership
• Development process
• Hosting
• Deployment
• Software architecture

25. Review Topics:
• Company view
• Product
• Technical leadership
• Development process
• Hosting
• Deployment
• Software architecture
• Quality Assurance

26. Review Topics:
• Company view
• Product
• Technical leadership
• Development process
• Hosting
• Deployment
• Software architecture
• Quality Assurance
• Stakeholder collaboration

27. Review Topics:
• Company view
• Product
• Technical leadership
• Development process
• Hosting
• Deployment
• Software architecture
• Quality Assurance
• Stakeholder collaboration
• Company culture and tech ecosystem

28. Optional Topics:
• Data Analysis / Business Intelligence
• Data Science / Machine Learning
• R & D
• Compliance: Data security, Privacy, etc.
• Internal IT
• Hiring
• …

29. Potentially Involved People:
CEO / founder(s)
CTO
Head of Engineering
CPO
Head of Product
Product Owner(s)
Scrum Master(s)
Agile Coach
Project Manager(s)
Mobile Engineers
Software Engineer(s)
Operations Engineer
DevOps
QA
Test Engineer(s)
Security Engineer
Data / BI team
Selected stakeholders such as Customer Support, Marketing, Sales
Internal IT
DataScientist(s)
Architect(s)

30. eCommerce Focus
• Tooling / components: Make or buy?
• Standard or custom solutions?
• Is there any real Intellectual Property?
• Focus Topics:
• Scalability
• Payment
• ERP: Stock, Accounting, …
• BI / Analytics

31. Review Format:
• 1:1 Interviews
• Group Interviews (e.g. dev teams)
• Whiteboard discussions (e.g. architecture)
• Documentation Review
Also:
• Code Walks / Code Samples
• Live samples (e.g. from CI or monitoring tools)
• Actual usage of the product
• Observing a Standup Meeting

32. Examples of Questions
“What parts of your tech landscape keeps you awake at night?”
“Which changes would you apply to your current architecture
if you had to scale from
n (unique visitors / transactions / requests) 2n, 10n, 100n, …?”
“Can you explain the reasoning behind the choice of XY?
Why didn’t you [make / buy] it?”
“Can you describe your role and responsibilities as CTO?”

33. Examples of Questions
“Describe your software architecture incl. 3rd party components, technology stack,
protocols”
“Do you have test automation in place?
Describe your toolchain and your process “
“What is your test coverage?”
“Can we have a quick look at the latest build on the CI server? >:-]”

34. Examples of Typical Red Flags / Antipatterns
Not-intented-here (NIH)
Syndrome:
“We are SO different! So we
decided to write our own ERP.”
http://www.dreamindemon.com/wp-content/uploads/smiling-lion.jpg

35. Examples of Typical Red Flags / Antipatterns
No idea about the own
landscape:
“What do you mean with
‘Software Architecture’?”
http://www.dreamindemon.com/wp-content/uploads/smiling-lion.jpg

36. Examples of Typical Red Flags / Antipatterns
Tech Archeology:
Hearing too often “this is for
historical reasons”
http://www.dreamindemon.com/wp-content/uploads/smiling-lion.jpg

37. Examples of Typical Red Flags / Antipatterns
Lack of Test Automation
(AKA “we didn’t have time for
this”)
http://www.dreamindemon.com/wp-content/uploads/smiling-lion.jpg

38. Examples of Typical Red Flags / Antipatterns
Not knowing the business
perspective (as a tech person):
“Please ask BI about the
conversion rate, it’s been a
while that I checked it”
http://www.dreamindemon.com/wp-content/uploads/smiling-lion.jpg

39. Prepare your Team
• Give them context
• State importance of DD
• Eliminate fear
• Give clear guidelines regarding
disclosure of information
• “Challenges instead of problems”
http://images.photowall.com/products/46854/zebras-in-a-group.jpg?h=650&q=90&

40. Your Skeletons in the Closet
• Relax: EVERYONE has them!
• Adress them proactively
• Provide a plan how to tackle
them
• Problem awareness and
problem solving skills are
way more important than
problems
https://de.pinterest.com/pin/65935582023920155/

41. Q & A

42. Thanks!
Questions?
cphilipps@me.com
Twitter: @chphilipps