There’s no shortage of interest when it comes to investing in tech. From SaaS platforms and fintech players to AI-driven tools and dev infrastructure startups, capital is flowing faster than ever into technology companies. But here’s the uncomfortable truth: As per recent market study study, 76% of tech acquisitions still fall short of their financial targets.
It’s not because the ideas are bad. Often, the technology itself shows promise. But cracks start to show when investors dig deeper, into codebases, product architecture, security practices, and scalability. And by the time those cracks surface post-deal, it’s usually too late.
That’s where strong technology due diligence changes the outcome. Not just by pointing out risks, but by giving investors clarity on what they’re actually buying. The foundation, not just the forecast.
The stakes are high. The expectations are higher. And anyone relying solely on surface-level checks is taking a bet without knowing the odds.
The Reality Check: Why Most Deals Miss the Mark
Investors rarely set out with poor judgment. Yet, 62% of mergers and acquisitions (M&A) fall short of their financial goals. And in many of these cases, the cause isn’t market shifts or customer churn, it’s weak due diligence.
Too often, technical assessments are rushed, surface-level, or built around outdated templates. A few code scans, a security checklist, and a team interview, then it’s off to close the deal. But that approach misses the deeper questions:
- Is the platform truly scalable, or is it held together by rushed patches?
- How much technical debt is buried under growth metrics?
- Are security protocols being followed, or just documented?
Investors are starting to realize that what’s under the hood can matter more than what’s on the pitch deck. As deals get more complex and tech becomes the core of value creation, skipping deep technical analysis isn’t just risky, it’s expensive.
A structured and honest tech due diligence process doesn’t just look for flaws. It asks: Is this business built to grow, or just built to look good?
ROI Reimagined: Data-Backed Benefits of Tech DD
The role of technology due diligence has shifted. It’s no longer just a checklist to prevent bad surprises, it’s become a tool for identifying what actually makes a deal valuable.
According to Dextralabs study, companies that conduct thorough research are 2.8 times more likely to reach successful outcomes than those that skip or simplify the process. That’s not a small edge—it’s the difference between a portfolio that performs and one that struggles.
What’s driving this? Investors are becoming more aware that product-market fit means very little without a strong technical foundation. A great idea can lose its edge if the codebase is brittle, the team is stretched thin, or the product can’t scale.
As seen in recent private equity activity, 73% of firms have shifted their focus from just reducing risk to actively finding value through deep technical insights. That includes identifying areas for operational improvement, assessing how tech choices affect margin expansion, and spotting innovation potential that’s not visible in a financial model.
At Dextralabs, this thinking shaped the development of their RCOI approach—a framework built to look beyond red flags and instead focus on Resilience, Capability, Opportunity, and Integrity in tech-driven businesses.
Because in the end, the return isn’t just about what a company does today—it’s about whether it’s built to do more tomorrow.
Emerging Trends in the PE & Investment World
Tech is no longer just one vertical among many, it’s becoming the common thread across most high-growth investments. In 2024 alone, technology-related deals accounted for 23% of all private equity deployment by value in the U.S., up from 21% the year before. That may seem like a modest jump, but in deal terms, it’s billions of dollars shifting toward software, platforms, and infrastructure plays.
The focus isn’t just on growth anymore, it’s on scalability, resilience, and long-term defensibility. That’s why technical due diligence is now a standard part of the process for 70% of private equity firms before committing capital.
Another trend gaining momentum: AI-driven companies are getting priority attention. Over 70% of PE firms now believe these businesses offer stronger long-term potential, not just because of what they build, but because of the technical teams and systems behind them.
And as the bar for product quality, performance, and privacy rises, so does the need for technical assessments that don’t just skim the surface.
Tech is now central to investment logic. The real question is whether the foundation can hold as the business grows and only a disciplined technical review can answer that with confidence.
What Modern Tech DD Really Looks Like?
Technical due diligence has come a long way from box-ticking and basic code reviews. The modern approach digs deeper not just to find risks, but to understand how well a product is built to scale, compete, and survive change.
At its core, tech DD today focuses on a few key areas:
- Data Security & Privacy: For 80% of tech executives, this is the top concern. And it’s not just about policies on paper—it’s about how systems are built and whether they actually protect user data under real-world pressure.
- Scalability: Can the product handle 10x the traffic, users, or transactions without breaking? Will it need to be re-architected in a year, or is it already future-ready?
- Code Quality & Technical Debt: A strong-looking product can hide years of shortcuts. Technical debt isn’t a dealbreaker but unacknowledged or poorly managed debt often is.
- Team Capability: Even solid architecture needs a team that understands how to evolve it. Are the engineers behind the product aligned with the company’s roadmap or constantly playing catch-up?
- Product Maturity: Some platforms are still prototypes wearing grown-up clothes. DD helps determine whether a product is ready for prime time or needs more work than the founders admit.
As one of the most reliable tech dd agencies, Dextralabs follow its RCOI framework—focusing on Resilience, Capability, Opportunity, and Integrity—to guide their assessments. This structure ensures they are not just spotting issues but evaluating what makes the tech valuable and where its limits might be.
Because the goal isn’t to say yes or no—it’s to provide a clear, honest picture of what you’re really investing in.
The Cost of Confidence: Time & Budget Considerations
Thorough technical due diligence isn’t cheap and it shouldn’t be. The average cost ranges between $50,000 to $150,000, and the process typically takes around 12 weeks, depending on the size and complexity of the target company. But in the context of multimillion-dollar investments, this upfront spend often prevents far more expensive problems down the line.
The biggest mistake investors make is rushing the process or trying to cut corners. When diligence is reduced to a compliance exercise, it tends to miss the very things that sink deals post-close—fragile codebases, overextended tech teams, or scalability bottlenecks that only surface under pressure.
Firms that specialize in tech due diligence today are moving away from bloated, generic reviews. Instead, they adopt structured frameworks that focus attention on areas that actually impact business outcomes. One such approach is the RCOI model—short for Resilience, Capability, Opportunity, and Integrity. This method helps separate noise from signal and keeps the process focused on strategic insights.
Ultimately, technical due diligence isn’t just about minimizing downside. It’s about giving investors the confidence to back businesses that are built to last—without second-guessing the foundation.
Sector-Focused DD: The Competitive Advantage
Not all due diligence is created equal. Generalist reviews may spot surface-level issues, but they often miss the deeper signals that matter in technology-driven businesses. That’s why sector-focused technical due diligence is becoming a key differentiator for investors who want more than just a green light.
Private equity firms with a sharp focus on tech consistently outperform their broader peers. Their edge comes from knowing what to look for—whether it’s how well an AI model is trained, the real scalability of a SaaS platform, or the sustainability of a DevOps pipeline. It’s this kind of context-specific insight that allows investors to make faster, more confident decisions.
According to recent findings, over 70% of firms believe that AI-driven companies hold stronger long-term potential. But assessing those companies takes more than a basic checklist. It requires a review team that understands the technical subtleties and how those choices translate into commercial outcomes.
Sector-specific DD isn’t about overcomplicating the process. It’s about recognizing that the right questions depend on the type of technology, the market it serves, and how that product will need to evolve. When the review reflects the industry’s pace and pressure, investors are far more likely to walk away with clarity not just compliance.
