Technology investment and due diligence

Technology businesses can be difficult to evaluate because product capability, market expectations and competitive conditions change together. A persuasive demonstration or an expanding addressable market does not establish investment quality. Commercial due diligence should identify the assumptions that matter most to the investment case and test how much confidence they deserve.

Translate the story into assumptions

Break the investment thesis into a small number of propositions. Customers will adopt the product; existing customers will stay and expand; the business can deliver at attractive margins; and its differentiation will remain relevant. Each proposition requires a different type of evidence.

This approach helps focus diligence on decisions rather than description. A lengthy market overview is of limited value if the investment depends on an untested change in buyer behaviour. Separate facts, management expectations and investor assumptions so the committee can see where uncertainty remains.

Understand the customer relationship

Revenue quality depends on how and why customers buy. Examine the use case, budget owner, procurement process and alternatives. Distinguish an experimental deployment from a product embedded in a critical workflow. Both can generate revenue, but they carry different implications for retention and expansion.

Customer concentration, implementation demands and the extent of bespoke work also matter. Strong growth can mask delivery constraints or dependence on a few relationships. Where evidence is available, examine patterns across customer groups rather than relying on a small set of favourable examples.

Challenge the source of differentiation

Ask what a capable competitor would need to reproduce the proposition. The answer may involve proprietary data, workflow integration, distribution, regulatory capability or accumulated trust. A technical feature that is valuable today may become widely available. The investment case should explain how the business can adapt if that happens.

For AI-enabled businesses, examine reliance on external models, infrastructure providers and data rights. Changes in access, pricing or performance can affect the economics. Commercial diligence should be coordinated with technical, legal and financial work rather than treated as a substitute for those specialist assessments.

Connect findings to the investment decision

Use scenarios to explore the consequences of slower adoption, higher delivery costs or greater pricing pressure. Identify which assumptions affect valuation most and which can be addressed through milestones, governance or transaction structure. False precision is less useful than a clear account of what could change the outcome.

The conclusion should support a decision: proceed, change the terms, seek further evidence or decline. Good diligence does not eliminate risk. It makes the important risks visible, distinguishes manageable execution challenges from weaknesses in the thesis and gives the investor a practical basis for ownership.