Respond to the data request
The list arrives, the team assembles what it can under time pressure, and the gaps are found by the other side and priced by them. Everything after that is defensive.
Diligence finds what is undocumented, and prices it.
The board wants a technology plan tied to the thesis, not a tools list.
Whether it is private equity diligence, a board that has started asking harder questions, or preparation for a raise, the shape is the same: somebody competent is about to examine your technology with the ability to affect the valuation. Technology debt that has been survivable for years becomes a price adjustment the moment it is documented by the other side. The advantage available to you is that you can run the same examination first.
Underneath
What is actually going on
The visible problem is rarely the one that decides how this goes. These are the parts that are true whether or not anybody has said them out loud.
Undocumented becomes unvalued
Diligence rewards what can be evidenced. Controls, contracts and roadmaps that exist only in people's heads are treated as absent, because from the outside they are indistinguishable from absent.
Debt turns into a number
An end-of-life system everyone has lived with quietly becomes a line item with a remediation cost attached, and that cost comes off the price rather than out of next year's budget.
The thesis has technology requirements
Doubling headcount, adding a geography, integrating acquisitions: each implies things about systems that nobody has costed. The board is asking about the plan, not the tools.
"We are fine" is not an answer
Confidence without evidence reads to an investor exactly like a company that has not looked. The absence of findings is not reassuring; it is a gap in the process.
The fork
Two ways this usually goes
Run the diligence on yourself first
Find what they would find, put a cost and a date against each item, and walk in with a plan already in progress. The same finding lands completely differently when you raise it.
The order
What to do, in sequence
The order matters more than the individual steps. Most of the cost in these situations comes from doing the right things in the wrong sequence.
- First
Run the examination yourself
The same evidence a technical diligence gathers: identity, endpoints, backup, spend, contracts and the single points of failure. From your own systems' exports.
- Then
Cost what it finds
Every material item with a remediation cost and a date. An owned number is a plan; an unowned one is a discount.
- Then
Tie the plan to the growth thesis
What the next three years of the business plan require from technology, sequenced and budgeted, in the language the board is already using.
- During
Answer from the document
Diligence questions get answered from work already done rather than assembled under deadline, which is visible to everybody in the room.
The questions
What you will be asked
Each of these has a real answer and a plausible one. Knowing which you are giving is most of the job.
What would a competent technical diligence find that we have not already documented?
What does the growth plan require from technology that we do not have?
What is the cost of the debt we have been living with, in numbers?
Who owns technology at board level, and what do they present?
The result
What you end up with
- A self-run diligence, completed before the data room opens
- Costed, dated remediation for everything material it finds
- A technology plan tied to the growth thesis rather than to a tools list
- Answers you can defend, from work already done
Also happening