Rapid tech due diligence: How Catalyst Fund assesses a startup’s tech

Alongside product-market fit and adequate control of data, underlying tech quality is a key determinant of whether a startup will be able to scale and hit growth targets. Although the tech that powers fintech startups is critical to their success, tech due diligence tends to form only a minor part of overall due diligence. These proceedings often focus on growth metrics and financial models, both because investors have expertise in these areas, and also because they are more easily evaluated using standardized formats and metrics. Tech due diligence, in contrast, falls outside the wheelhouse of most investors and moreover, moves too fast for standardized assessments.

Given these tendencies, Catalyst Fund’s Lead Technologist Matt Grasser and Head of Growth Aaron Fu led a discussion with 30+ leading impact investors on how Catalyst Fund evaluates startups joining our portfolio on four aspects of tech quality: robustness, inclusivity, agility, and team skill.

This tech due diligence generally needs to be fast and simple so we use a few quick questions to rapidly assess the quality and scalability of the tech stack, and how well the team is thinking about tech development. Focusing tech due diligence on the four elements of robustness, inclusivity, agility, and team skill using proxy measures and heuristics gives us a fairly complete picture of whether the tech has been well-built, or if the startup needs additional support in this area.