Meaning
A thorough analysis of a company’s codebase identifies the authors, licenses, and ownership of all submitted code. Performing a software repository audit is a standard step during investor due diligence before a funding round. This check ensures that the startup has full ownership of its technology.
Author Verification
The audit matches the contributors in the repository history with signed contractor or employee agreements. If code was written by someone who did not sign an intellectual property assignment, the company may not own it. This discovery requires the company to track down the author and get a signed agreement.
License Compliance
Startups often use open source libraries to build their products quickly. The audit checks that the licenses of these libraries allow commercial use and do not require the company to make its own code public. This review prevents issues that could force the company to rewrite parts of its product.
Risk Prevention
Finding and fixing code ownership issues before an investment round prevents delays and maintains the company’s valuation. Investors may demand a lower price or better terms if they find significant risks in the codebase. This preparation is a key part of getting a company ready for a sale or funding round, ensuring that the technology is fully owned and free from any potential legal challenges from past contributors or open source projects.
