Most technical founders fail due diligence not because their technology is bad, but because they don’t understand what investors are actually evaluating.

After conducting technical due diligence for $200M+ in fintech investments, here’s what really matters.

The $10M Mistake

Last month, I watched a Series A fall apart in the final week. Great team, solid product, growing revenue. The deal was basically done.

Then technical due diligence began.

The investors discovered the startup was processing payments through a single vendor with no failover. One API change could kill the entire business. Deal dead.

This happens more than you think. According to our analysis of 50+ failed fintech deals, 35% fall apart during technical due diligence. Not because of bad code, but because of strategic technical decisions that create unacceptable risk.

Here’s how to avoid that fate.

What Investors Actually Evaluate

Forget the mythology about VCs caring about your tech stack. They don’t care if you use Python or Go. They care about three things:

1. Can this scale to $100M ARR without breaking?
2. What are the single points of failure that could kill the business?
3. How much will it cost to maintain technical competitive advantage?

Everything else is noise.

The Real Due Diligence Checklist

Architecture & Scalability

What they’re looking for:

• Clear separation between business logic and infrastructure
• Horizontal scaling capability (can you 10x transaction volume?)
• Database architecture that won’t hit scaling walls
• API design that supports multiple client types

Red flags that kill deals:

• Monolithic architecture with no clear microservices strategy
• Single database with no sharding plan
• APIs that require major versions for minor changes
• Any component that can’t be independently scaled

What to prepare:

• Architecture diagrams showing data flow and scaling bottlenecks
• Load testing results demonstrating 10x current capacity
• Database performance metrics under stress
• Clear roadmap for handling 100x growth

Security & Compliance

The questions they’ll ask:

• How do you handle PCI compliance?
• What’s your data encryption strategy?
• How do you manage access controls?
• What’s your incident response plan?

What impresses investors:

• SOC 2 Type II certification (or clear timeline to get it)
• Zero-trust security architecture
• Automated compliance monitoring
• Detailed incident response procedures with defined RTO/RPO

What kills deals:

• No formal security policies
• Customer data stored unencrypted
• Admin access without proper controls
• No audit trails for financial transactions

Financial Infrastructure

This is where most fintech due diligence gets intensive.

Critical components:

• Payment processing redundancy (multiple providers)
• Financial reconciliation accuracy (99.99%+ transaction matching)
• Real-time fraud detection capabilities
• Regulatory reporting automation

The deep dive questions:

• How do you handle failed transactions?
• What’s your approach to financial data consistency?
• How do you manage money movement compliance?
• What happens if your primary payment processor goes down?

Pro tip: Investors want to see that you understand money is different from data. Lost data is bad. Lost money is existential.

Team & Technical Leadership

What they evaluate:

• Does the technical team understand financial services regulations?
• Can the CTO scale the engineering organization?
• What’s the technical knowledge depth across the team?
• How do you handle technical debt?

Questions they’ll ask the CTO:

• How do you make build vs. buy decisions?
• What’s your approach to managing technical debt?
• How do you ensure code quality at scale?
• What’s your strategy for technical hiring?

The 30-Day Preparation Plan

If you’re raising a Series A or later, start preparing 30 days before you need it:

Week 1: Documentation

• Create detailed architecture documentation
• Document all third-party integrations and dependencies
• Prepare security and compliance documentation
• Create technical team organizational chart

Week 2: Testing & Metrics

• Run comprehensive load testing
• Document current system performance metrics
• Create disaster recovery testing procedures
• Audit all security practices

Week 3: Risk Assessment

• Identify and document all single points of failure
• Create mitigation strategies for each risk
• Prepare vendor redundancy plans
• Document regulatory compliance status

Week 4: Presentation Prep

• Create technical presentation for investor meetings
• Prepare demo environment that won’t break
• Brief all technical team members on likely questions
• Create FAQ document for common technical concerns

The Questions That Reveal Everything

Smart investors will ask these specific questions. Your answers determine whether you get funded:

“Walk me through what happens when your primary payment processor goes down.”

Bad answer: “We’d switch to our backup processor.” Good answer: “We have automated failover to Stripe if Adyen fails, with transaction retry logic and customer notification workflows. Our SLA is 99.9% uptime with <30 second failover time.”

“How do you handle financial reconciliation?”

Bad answer: “We reconcile daily using CSV files.” Good answer: “We have real-time reconciliation with our payment processors’ APIs, automated anomaly detection, and exception handling workflows. Any discrepancy >$1 triggers immediate investigation.”

“What’s your biggest technical risk?”

Bad answer: “We don’t really have any major risks.” Good answer: “Our biggest risk is scaling our fraud detection system. We’ve built it to handle current volume but will need to redesign the feature pipeline for 100x scale. We have a 6-month roadmap to address this.”

The Million-Dollar Insight

Here’s what most founders miss: investors aren’t trying to find reasons to say no. They’re trying to find reasons to believe you can scale to $1B+ without the technology becoming a liability.

They’ve seen too many startups hit scaling walls, suffer security breaches, or get shut down by regulators because of poor technical decisions made early on.

Your job isn’t to convince them your technology is perfect. Your job is to convince them you understand the risks and have plans to address them.

Show them you think like a CTO of a billion-dollar company, not a startup founder who got lucky.

What Happens After You Pass

Once you pass technical due diligence, everything changes. Investors start talking about valuations. Term sheets get drafted. Board seats get negotiated.

But here’s the thing: the companies that breeze through technical due diligence are the same ones that scale successfully post-funding. It’s not a coincidence.

The technical discipline required to pass sophisticated due diligence is the same discipline required to build a fintech company that reaches $100M+ ARR.

Master one, and you’ve mastered both.

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Next week: The embedded finance platform architecture that processed $2B in transactions (and the 3 design decisions that made it possible).