'The Technical Section of Our IC Memo Is Always the Weakest Part'

In a series of practitioner interviews conducted across European VC in 2024 and 2025, one quote stood out. An associate at a Benelux fund, speaking anonymously: 'The technical section of our IC memo is always the weakest part. I'm essentially writing down what the CTO told me and hoping it holds. There's no one in the room who can actually challenge it.'

It's the kind of thing that doesn't make it into fund marketing materials. But it describes the reality at a significant proportion of European funds — and it has direct consequences for how deals are priced and structured.

The expertise gap in European VC

European VC has historically drawn from investment banking, consulting, and legal backgrounds. US VC has a well-documented culture of operator-investors with direct product and engineering experience. The gap shows up most clearly at the associate level — the people responsible for building the IC materials that inform investment decisions.

Fewer than half of Europe's most valuable tech company founders have software or data science backgrounds, compared to 100% in comparable US cohorts. The funds backing them are even more skewed toward financial and legal expertise.

This is not a criticism. Financial and commercial rigour is what drives returns. But it creates a specific blind spot: the technical section of every IC memo depends entirely on what the company's CTO chose to share — and how generously the associate interpreted it.

What the IC memo is missing

A typical IC memo for a Series A deal in Europe will contain a detailed financial model, market sizing analysis, competitive landscape, team assessment, and commercial thesis. The technical section might run two or three paragraphs.

What it rarely contains: an independent view of architecture quality, an assessment of scalability against the commercial thesis, a quantified read on technical debt (in euros, not vague terms), a benchmark against comparable companies, or a view on key-person dependency.

These aren't edge cases. In 250+ assessments across European deals, we find material technical issues in the overwhelming majority — issues that are either unknown to the investment team or known but not quantified. The question isn't whether the issues exist. It's whether the price reflects them.

The three things a deal team actually needs to know

After hundreds of conversations with investors, the questions they're actually trying to answer fall into three categories:

• Flags: is there something here that should stop or significantly reprice this deal?
• Context: if something looks problematic, is it actually a problem in this specific investment context?
• Crown jewels: what's technically strong, differentiated, and worth paying for?

Partners understand this instinctively. The problem is that associates building IC memos can't answer these questions without either technical expertise or an independent technical verdict to work from. In the absence of both, they write what the CTO told them.

The cost of the weak section

The IC memo shapes the investment decision. If the technical section is unreliable, the decision is made with less information than it appears to have. That's risk dressed up as rigour.

When technical issues surface post-close — scalability walls, security exposure, critical key-person dependencies — the question of whether the IC process was adequate becomes uncomfortable. A partner at a UK fund told us: 'We overpaid for three deals in the last fund because we only found out about the debt after we'd already said yes to the number.'

This is a structural problem, not an individual failing. Associates at European funds aren't underperforming. They're doing their jobs with the information available. The issue is that the right information isn't available — because no one went and got it.

What good looks like

The funds with the strongest technical sections in their IC memos share one characteristic: they have an external, operator-verified technical verdict to work from. Not a consultant's report. A verdict from people who've built what they're evaluating — structured to answer the three questions above in language a non-technical IC can act on.

That's what the X-Ray delivers. One IC-ready document covering architecture, security, delivery, AI readiness, and code quality — scored, benchmarked, and written for the deal team, not the engineering department. In 1 business day. Before the term sheet.

The associate still writes the memo. They just no longer have to hope the technical section holds.

Sources

• PitchBook, 2023 — Technical background of European vs. US VC founders
• The Economist — European VC expertise gap (operator vs. banker/lawyer background)
• Listalpha EMEA Tech DD Report — formal tech DD rates at Seed/A stage
• Practitioner interviews, Benelux and UK VC associates, 2024–2025 (anonymised)