Short answer. Technology is one of the top three levers on portfolio company value, but most operating partners treat it as a defensive checkbox rather than an offensive tool. Get the diligence sharper, use the 100 days to fix what will compound, protect the platform during hold, and stage the exit-prep work early enough that a buyer’s diligence pass finds a clean shop. Everything below is how we help operating partners run this playbook, from the pre-deal read through to the exit prep, based on the Technical Reads and modernisation engagements we run for PE clients.
What operating partners are actually solving for
An operating partner is not a portfolio company CTO. The job is to protect and multiply the value the fund paid for, across a portfolio of companies at different maturity levels, with limited direct engineering headcount. The pattern that consistently produces returns has three properties:
- The technology function is on-plan, on-budget, and audit-ready at any given moment. No surprises to the IC, no surprises to the buyer at exit.
- The engineering capacity is proportional to the commercial ambition. Not gold-plated, not starved, not blocked on a founder-CTO who will not delegate.
- The value creation levers are prioritised by cash impact, not by what is easiest to do. Cloud cost reductions, revenue-blocking modernisation, and de-risking key-person dependencies come before rebrand refreshes and greenfield builds.
The playbook that gets there is fairly consistent across sectors and hold sizes. It changes shape but not principle.
Phase 1: Pre-deal diligence
The commercial team already runs QoE, market study, and management diligence. The technology diligence question is not “is the software good,” it is “will the price we are offering survive the tech we are inheriting.”
Four things should come out of a proper pre-deal technical read:
- Red flags that change price or terms. Unmaintained core services, single-vendor lock-in with a renewing contract, key-person dependency where the sole engineer who understands the platform is unlisted on the ELT slide.
- Yellow flags that change the 100-day plan. Cloud spend that is 40% higher than it should be for that scale. Team structure that will not survive the next 2x of revenue. Compliance posture that will fail the first audit.
- Green flags that support the thesis. Architecture that scales, a team with the depth to absorb the growth, a data foundation that supports the upsell hypothesis.
- A dollar-figure remediation plan. Not “there is some tech debt.” A specific list of five to ten items with cost, timeline, and dependency, so the operating partner walks into the IC with a plan, not a caveat.
We package this as a 10-day Technical Read, which is enough to answer the four questions above without turning into a six-month engagement. If the answers are red, the IC has evidence to reprice or walk. If the answers are yellow or green, the operating partner already has the 100-day plan built.
The single most common mistake at this phase is skipping tech diligence when the commercial thesis is strong. Every operating partner has a story of a deal where the tech turned out to be twice the remediation cost of what management represented. The diligence pays for itself in the deals it does not save you from. Before you commission the full read, you can score the tech risk yourself in about ten minutes.
Phase 2: The 100-day plan
The 100 days matter because they are the only period when the operating partner has full attention, a fresh mandate, and a management team that expects change. Do not waste them.
The 100-day tech plan should have exactly three workstreams:
Workstream 1: Fix the diligence red flags. If the read surfaced a critical single-vendor lock-in, kick off the migration in week 1. If the read surfaced a key-person risk, hire the second engineer in month 1 and start the knowledge transfer in month 2. Do not queue these for later. Later never comes.
Workstream 2: Set up board-currency tech reporting. Every board pack the operating partner presents should have a technology section that fits on one page and uses numbers the CFO recognises. Not “engineering velocity,” which nobody outside engineering understands. Instead: cloud spend as a percentage of revenue, uptime SLA vs commitment, security posture score, engineering headcount vs plan, roadmap milestones landed vs planned. That reporting is a three-week exercise to set up and it pays for itself at every board meeting for the rest of the hold.
Workstream 3: Align the tech roadmap with the value creation plan. If the thesis is upsell into a new segment, the roadmap should have the segment-specific product work at the top. If the thesis is cost-out through automation, the roadmap should have the automation projects at the top. If the thesis is a bolt-on acquisition, the roadmap should have the platform-integration work at the top. Operating partners lose value when the roadmap is set by the incoming CTO’s personal interests rather than by the fund’s thesis.
What the 100-day plan should not do: rewrite the platform. A ground-up rewrite in the first 100 days is almost always a mistake. It bets the operating partner’s credibility on an outcome that is 18 to 30 months away, run by a team that just changed reporting lines.
Phase 3: Hold period discipline
Hold is where the compounding happens. It is also where operating partners lose the most value by under-investing or over-investing.
The hold-period playbook is roughly:
Cloud spend as a compounding lever. A properly run cloud cost programme reduces spend 20 to 40% in the first year and holds it there. That flows straight to EBITDA. The catch is that it takes deliberate engineering effort and it does not happen if nobody is watching the numbers. Operating partners should require a quarterly cloud cost review at board level.
Fractional CTO cover for the sub-scale portcos. Not every portco needs a $300,000 full-time CTO. Many need eight to twelve days a month of experienced technical leadership to run a small team, hold the roadmap accountable to the value creation plan, and represent the company on tech at board and buyer meetings. Fractional engineering leadership is the pattern that works, and it saves the fund a step-function on cost across a portfolio.
Compliance and security posture as continuous work. DORA, SOC 2, ISO 27001, industry-specific regimes (PCI DSS, HIPAA, MiFID) do not stay compliant on their own. Under-invest and you are looking at a nasty surprise in exit diligence. Over-invest and you are spending money the exit valuation will not reward. The right level is “audit-ready any Monday morning” without a dedicated 10-person team.
Do not rebuild during hold unless you have to. Modernisation is a value-creation lever when the current platform is blocking revenue or hemorrhaging money. It is a value-destruction lever when it is being done because the new CTO wanted to use Kubernetes. Operating partners should be sceptical of any modernisation project whose business case is not one of: revenue unlock, cost reduction, risk reduction, or explicit exit-prep.
Phase 4: Exit prep
The best exit-prep work starts 18 months before the process kicks off, not two months before. A buyer’s diligence pass is not fundamentally different from a pre-deal diligence pass, and the same red flags that would have moved your bid are going to move theirs.
The exit-prep tech workstream should:
- Land the platform on a version that will survive scrutiny. No unmaintained dependencies, no known critical vulnerabilities, no single-vendor lock-in that renews at exit.
- Have compliance certifications current and evidence organised. SOC 2 Type II reports for the last 24 months, ISO 27001 certificate current, DORA readiness documented if applicable. Auditor letters ready to hand to a buyer.
- Team structure resolved. No unresolved key-person dependencies. The CTO and their direct reports are all in place and on plan. The org chart is defensible without “we are hiring for that role.”
- Documentation buyer-ready. Architecture diagrams current. Runbooks up to date. Roadmap with 12-month lookahead. Cost forecast defensible.
- A sample technical read pack prepared. Yes, actively. A well-run PE-owned portco should have a document pack ready to hand to a buyer’s technical diligence team on the first day of the process. It saves 30 days of process time.
We increasingly get called for pre-exit technical reads that mirror the pre-deal one, run at 6 to 12 months out from the intended process, so the operating partner has a clean shop before the bankers start their work.
Cross-portfolio value creation
Where operating partners with three or more portcos in adjacent sectors can get particular leverage:
Shared engineering leadership. A senior engineering leader working three days a week each at three portcos costs less than one full-time senior hire at any of them, and the portfolio-level pattern recognition is a real asset.
Common tooling and vendors. Fund-level negotiation with AWS, Snowflake, Datadog, Auth0 unlocks pricing that individual portcos cannot get. The savings across five portcos are often larger than a single portco’s entire cloud bill.
Cross-portco talent movement. When one portco has a strong engineer whose growth is capped and another has a senior gap, the fund can facilitate the move without going through an external hire. This is quiet but underrated.
Shared compliance framework. If two or three portcos need SOC 2, running the audit programme with a shared vendor and shared internal templates cuts cost and time on all of them.
When to hire vs when to use outside help
Operating partners get asked this constantly by portco boards. The answer we recommend:
- Hire the permanent CTO when the company has 40+ engineers, the technical strategy is stable enough for a 3-year commitment, and the market can supply the profile you need at a price you will pay. Otherwise a fractional or interim is the better call.
- Use a fractional CTO when the portco has 5 to 40 engineers, needs senior technical leadership, and does not need or cannot support a full-time hire.
- Use a consultancy for defined-scope engagements where the outcome matters more than the ongoing relationship: modernisation projects, technical diligence, compliance-platform builds, MVP development consulting. Fixed price, fixed timeline, clear handover.
- Do not hire multiple senior engineers at once. The onboarding cost is deeper than most operating partners appreciate, and the culture risk is real.
What good tech reporting to the board looks like
A one-page monthly board tech section, aligned with the language the operating partner and the CFO already use:
- Availability. Uptime as a percentage against SLA commitment.
- Cost. Cloud spend and total tech spend as a percentage of revenue, with trend.
- Delivery. Roadmap milestones landed vs planned this month, with a red/yellow/green.
- Security and compliance. Current status against relevant frameworks, plus any incidents in the period.
- Team. Headcount vs plan, attrition, and any hires currently open.
That is it. Anything more detailed is engineering-management reporting, not board reporting. Boards that get five KPIs a month and one qualitative narrative make better technology decisions than boards that get 40 KPIs and no narrative.
Where we fit
We run three flavours of engagement for PE-owned businesses:
- Technical due diligence (our Technical Read) for pre-deal and post-close diligence, 10 days. The pre-acquisition tech diligence checklist is a free PDF version you can work through yourself in an hour.
- Modernisation projects for the specific remediation and value-creation work that comes out of the read.
- Fractional engineering leadership for portcos that need experienced technical cover without a full-time hire.
All three are fixed-price, agreed upfront, and designed for the reality that an operating partner is running a portfolio, not one company. If you are an operating partner running a portfolio and want to talk through where these levers apply, book a call and we will spend 30 minutes on the specific portco you are thinking about.
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Ex-NASA engineer and cloud architect with over a decade of experience building scalable systems for startups and enterprises.
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