The Hidden Cost of Technical Debt
2 March 2026
Most conversations about technical debt happen too late. By the time it surfaces in a due diligence report or holds up a funding round, the damage is already done. The options available to fix it at speed are expensive, disruptive, and never quite as clean as they would have been a year earlier when there was still time to do it properly.
If your business is PE-backed, approaching a raise, or heading into a period of significant growth, technical debt is not just an engineering concern. It has a direct bearing on your valuation, your deal timeline, and in some cases, on whether a deal proceeds at all.
Technical debt compounds quietly, every shortcut taken to hit a deadline, every system added because it solved an immediate problem, every migration that remained six months away from starting for three years running, these accumulate in ways that simply do not show up on a P&L until the pressure of a deal or a growth phase forces them into the open.
Lee Provoost, CTO of Flagstone, the UK's leading cash savings platform managing over £17 billion in client assets, knows this well. When he joined the business, he inherited more than a decade of product decisions made at pace, each one entirely rational at the time it was made.
"Businesses that have been around for over ten years have accumulated a lot of historic decision making that makes running the business more complex. Bespoke terms and conditions with partners, processes that were introduced to win a particular deal. If you add ten years of those decisions during the hustle phase of building a business, all of a sudden you understand why you have all these complex edge cases in your system." - Lee Provoost, CTO, Flagstone
This is the reality for most businesses that have grown quickly. The architecture that carried you through your first few years of growth is rarely the architecture that will carry you through the next stage. The longer that gap goes unaddressed, the more expensive and the more visible it becomes to the people you need to impress.
When a private equity firm or strategic acquirer runs technical due diligence, they are not simply auditing code. They are trying to answer one question, how much of this company's stated value is at risk because of decisions that have already been made?
The issues that raise concern are rarely dramatic. More often they are the absence of clear ownership across the codebase, release processes that slow delivery to a crawl, test coverage that gives the engineering team no real confidence and tightly coupled systems that force separate teams to work on top of each other. Individually, none of these looks catastrophic. Together, they paint a picture of a business where the foundations have not kept pace with the growth sitting on top of them.
Lee described this directly during a recent episode of Leaders and Founders. At Flagstone, two engineering teams had been working in such close proximity within the same codebase that they were constantly getting in each other's way. The decision to invest time in separating those systems was not glamorous, but the operational case for doing it was clear and measurable.
"Two teams were constantly stepping on each other's toes. After the separation, pull requests went through in almost a tenth of the time. The impact is easy to measure, not only in velocity but in employee happiness. One of the big statements on the slide they presented was: it's actually fun to work on this codebase." - Lee Provoost, CTO, Flagstone
Faster delivery, cleaner ownership, a team that is genuinely motivated to work in the codebase, this is exactly what technical due diligence is looking for evidence of. Its absence is what triggers valuation discounts and renegotiated deal terms.
There is significant pressure on leadership teams right now to show they are doing something with the technology tools that are attracting so much attention in the market. Boards want to understand the return on investment from automation, from productivity tooling, from new development approaches. It is a reasonable question but it is often being asked before a more fundamental one has been answered, have we actually got the basics right?
Lee made this point with real clarity on the podcast. Flagstone made a deliberate decision in 2025 to take a measured approach to adopting new tools and focus instead on organisational structure, codebase ownership, release pipelines and testing coverage. His view was that this foundational work, done properly, could deliver a 20-30% improvement in productivity without touching anything new.
"There are so many basics that companies tend to forget. If you actually get your house in order, a lot of companies could easily get a 20-30% productivity boost without even touching AI or GitHub Copilot or any of those products." - Lee Provoost, CTO, Flagstone
For any business trying to demonstrate operational maturity to investors or preparing for the scrutiny of due diligence, this matters. It is considerably easier to make a compelling case for the next phase of growth when the engine underneath is already running well.
Technical debt crosses a threshold when it stops being an internal inconvenience and starts affecting how the business is perceived and valued from the outside. That transition happens in several ways, often simultaneously.
The most direct is the drag it creates on delivery speed. If a significant proportion of engineering time is spent working around legacy systems, managing workarounds, or navigating parts of the codebase that nobody owns clearly, the team is delivering less than it should be. That shows up in product roadmaps that slip, in features that take longer to ship than the competition, and in a team that becomes increasingly hard to retain.
Developer retention is its own compounding problem. The engineers who leave first tend to be the ones with the most options, which in practice means your strongest people. The knowledge they carry with them is rarely documented well, and the true cost of replacing them goes well beyond what a recruitment fee captures.
In a due diligence process, all of this surfaces. Slow release cycles, a high proportion of time spent on maintenance rather than new work, and critical dependencies on individuals who hold undocumented knowledge. These are patterns that experienced technical reviewers are trained to find. They do not simply raise concerns, they translate directly into adjusted valuations and harder conversations at the table.
The difficult truth about technical debt and valuation is that by the time a deal is in motion, the window to address it meaningfully has often already closed. Serious remediation takes time, not because the work is impossibly complex, but because it has to happen without disrupting the business that is still running while it is being done.
Lee's re-platforming at Flagstone is a useful reference point here. He went in confident it would take nine months, it took sixteen. That was with a strong, experienced team, clear executive support, and a concurrent period of significant business growth, while migrating £12 billion in client assets from one platform to another.
"You hear a lot of horror stories of failures of re-platforming. The one thing I got wrong was I was convinced we would deliver in nine months and it turned out to be sixteen months. But the fact that we actually managed to do that with the team, keeping the business running throughout, that is something I am quite proud of." - Lee Provoost, CTO, Flagstone
The takeaway is not that transformation is too difficult to attempt, it is that it requires honest planning, experienced leadership, and enough runway to do it on your terms rather than someone else's. A business that begins that process 18 months ahead of a raise is in a fundamentally different position to one that starts six months out under pressure.
Not all technical debt is the same, and part of the value that experienced technical leadership brings is knowing the difference. Some debt is a deliberate trade-off, made with clear eyes and a plan already in place to address it. Some is structural, baked into an architecture that made sense at an earlier stage of the business. Some has simply accumulated through a lack of standards or ownership over time.
Investors and acquirers understand this distinction better than many leadership teams assume. What concerns them is not the existence of technical debt. Every business of any meaningful scale carries some. What concerns them is whether the leadership team can speak to it clearly; what it is, how it came to exist, and what the plan is. Confidence and clarity on those questions will carry a deal further than a codebase with no debt and no one who can explain why.
The businesses that tend to navigate technical due diligence well are those where the CTO can walk into that process and talk about the debt in business terms. What it is costing in delivery speed, what has already been done to address it, what the roadmap looks like going forward. That requires someone with the technical depth to understand what is actually there and the communication skills to translate it for an audience that is thinking about risk, not architecture.
If your business is within 18 to 24 months of a raise, an acquisition, or a significant growth phase, the right time to take stock of your technical foundations is not when the term sheet arrives. It is now, while there is still time to address what needs addressing on your own schedule.
An independent technical review gives you a clear picture of where your exposure sits, what the highest-priority work looks like, and how to present your technical position to investors in a way that builds confidence rather than raising questions. It can also surface where straightforward foundational improvements could deliver meaningful gains in delivery speed and team productivity before anyone external has had a chance to look under the bonnet.
The cost of addressing technical debt on your own timeline is always lower than the cost of addressing it under someone else's.
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