Why tech due diligence is critical to investment success

Howard Simms, Apadmi Ventures CEO, chats about the importance of performing the right checks on your tech when investing in start-ups.

 

Since we started Ventures, we’ve witnessed many business owners overlook the importance of checking over the technology behind their investment.

But it’s crucial. Which is why we offer a technical due diligence service to a wide variety of investors. Essentially, we’ll lift the bonnet on your technology product and investigate how it’s been built and to what standard.

As someone that’s potentially about to invest millions in a digital business, you need to know exactly what you’re inheriting – and we can help you do that. We’ve seen many examples over the years of tech stacks and structures that have been built with little care and without best practice being ensured.

Shoddy tech means your platform won’t be scalable, you’ll never achieve the mass adoption you need or sales you want – all because the platform can’t handle a high number of users at any one time.

A look at JigTalk’s tech

One of our investments, Manchester-based dating app JigTalk, came to us because of their “bad tech” experience.

They had a fantastic, market-disrupting idea, huge plans, bags of ambition and enthusiasm – but their business was failing because of the technology they’d had built by a third party.

Many great ideas are crippled for the same reasons, and the promises of quality by the third party had left these entrepreneurs in a terrible position with a year of progress lost.

We took everything apart and started again. We identified what they were trying to do with the app, what the user journey should look like, why issues had been caused, and rebuilt it with a robust technology platform designed for scalability.

What does technical due diligence involve?

The aim of TDD is to understand what’s been built, how it’s been built, and how it’ll cope with the challenges that the expected growth of the business poses.

To answer those questions, we’ll look at 5 key areas:

  • The team– we need to understand the key people in the team. Do the leaders have the relevant background and experience? Is the team switched on and sharp?
  • The processes used– as businesses grow, the difference between success and failure can often be the processes used and whether or not they’re fit for scaling. Individual-centric, ad-hoc processes will always break down as key individuals get swamped – lightweight, scalable processes can help to spread the load across the team.
  • The solution’s architecture– as systems get more complex, the number of ways to build them grows exponentially. We want to understand the underlying principles of the existing system’s build, and how it’s expected to change over time.
  • The technology itself– in the tech world, things move fast. New frameworks and methodologies appear and disappear – companies do the same. Selecting the technologies which underpin your solution is a crucial part of understanding the longevity of the platform.
  • How data is gathered and used– data is the lifeblood of business, informing decisions and driving interactions with your customers. However, gathering the right data, structuring it in the right way, and ensuring that relevant policies and compliance are in place is critical.

If you want to know more about how important technical due diligence is, don’t take our word for it. We hold regular talks on TDD were other start-ups and business owners can discuss their own experiences of tech investments.

Why not join us on our next one?

Or, if you’d like to know more about the TDD service we provide, feel free to get in touch with us.