Due Diligence

“Learning is not attained by chance, it must be sought for with ardor and attended to with diligence.”

I love learning, but it can be frustrating.

Late last year I decided to liquidate an account that held tech stocks. This account was for learning and was going down at a rapid pace.

These funds were set aside to find a micro SaaS I could acquire, market, and grow.

After a couple of months and a few failed offers, I found a Jasper.ai clone that was using OpenAI. The sales site and product were far more polished than the other copy cat SaaS I was seeing on acquire.com.

I sent an LOI within 3 hours of the posting going live on the marketplace and a week later I signed the APA.

Everything moved really quickly but I was eager to learn and start marketing the tool.

During the due diligence phase, I naively ignored a few red flags and figured we would sort them out after the deal was complete.

I was wrong.

Here is what happened, and what it taught me.

Mistake #1: Not checking the validity of the customer base

The seller showed me screenshots of the 7 active customers using the product. I took him at his word. As soon as the Stripe account was transferred all 7 payments failed. I reached out to each customer via email and didn’t hear back. I checked and each email was legit (not on a spam list) but seems odd that all 7 would have insufficient funds

What I learned.

Ask to see the last 6 months of payment to prove they are real accounts paying on a monthly basis.

Mistake #2: Don’t assume the code base isn’t going to change

Everything appeared to be working while we were in the due diligence phase. However, as soon as I had possession of the code base in my personal Github account things started functioning a little odd.

The first issue was free trials was no longer able to convert to paid customers. The button to add billing to Stripe wasn’t working.

The log-out link wasn’t working. Plus a few other random quirks.

I didn’t catch these in time and had already sent the second half of the funds to close the deal.

I sent the seller a couple follow-up messages looking for them to make good on their end – but no dice.

What I learned

DO NOT WIRE THE FINAL PAYMENT UNTIL YOU ARE 100% HAPPY WITH THE PURCHASE

What’s next?

This project hasn’t started the way I had hoped. However, I am still very excited to learn from this project and fully intend to get it working and start marketing it.