Tips To Do Due-Diligence for SaaS Software Deals

Tips to do
Due-Diligence
for Buying SaaS Software

When considering SaaS deals from startups, it’s crucial to conduct thorough due diligence. This guide simplifies the process into ten essential steps:

Step 1: Understand SaaS Deals

Recognize that these deals offer long-term access to software at a one-time cost but come with risks if the startup fails.

Step 2: Identify the Parties Involved

Buyers are usually small businesses or solopreneurs, while sellers are typically early-stage B2B startups.

Step 3: Vet the Founders and Team

Investigate the experience and past achievements of the startup’s founders and team members.

Step 4: Evaluate the Startup’s Finances

Financial stability is paramount. Investigate funding, revenue, burn rate, and overall financial health.

Step 5: Scrutinize the Product

Test the product yourself, talk to current users, and look out for any recurring issues or limitations.

Step 6: Evaluate Market Potential

Understand the size and growth potential of the market, and assess the product’s competitive advantage.

Step 7: Assess Customer Success Factors

Reach out to existing customers for feedback and look at online reviews and ratings.

Step 8: Review Contract Terms

Pay close attention to what the SaaS defines as ‘lifetime’ and other critical terms in the contract.

Step 9: Evaluate Integrations and APIs

Ensure the product can integrate smoothly with your existing technology stack.

Step 10: Perform Security and Compliance Reviews

Verify the startup’s adherence to security practices and regulatory compliance.

By following these steps, you can make an informed decision on whether a SaaS deal aligns with your business needs and risks.