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MENTAL MODEL · M4967

Technology Due Diligence

Technology Due Diligence
BusinessmediumFinance
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Updated 2026-08-18

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INTRODUCTION

English translation pending.

CORE DEFINITION

Technology due diligence is the technical counterpart to financial and legal due diligence in venture investing and mergers, developed as investors learned that a persuasive demonstration says little about engineering quality. It evaluates the target's technology assets, intellectual property ownership, team depth, and system architecture through code review, patent checks, and interviews. The core claim is that independent verification replaces founder self-reporting and converts vague technical risk into quantified findings. Key qualifications are that scope must be defined up front and that key-person dependency deserves explicit attention.

SCAFFOLDING EFFECT

psychology

Reduce cognitive load

- Define the scope: agree up front which assets, code, and intellectual property will be examined. - Verify ownership: confirm that the company actually owns the technology it claims. - Rate the risk: convert findings into a rating that adjusts price or kills the deal.

anchor

Anchor fast decisions

Investors and founders hold asymmetric information, and founders have every incentive to present the technology at its best. Independent review of code, patents, architecture, and team replaces those claims with verified findings, which reduces the chance of an expensive surprise after the deal closes. Because the review produces a rating rather than a yes-or-no verdict, its output feeds directly into price and terms.

MINIMUM ACTION

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Source support: Explicit

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    peopleapp.comhttps://www.peopleapp.com/rmharticle/30021659766ZH · Explicit
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