Are You Looking to Sell Your Startup?
Welcome to the Dave vs. Startups.
After bootstrapping my mobile safety app to $6.5M in revenue with 60% profit margins, I started getting acquisition interest from all directions.
So the biggest challenge wasn't getting offers.
But it was figuring out what information to share during due diligence without giving away the crown jewels of my business.
Most founders get this sequence completely wrong.
Here's a roadmap to navigate due diligence without giving away the farm (that allowed me to sell my SaaS for $40M):
Dave and Chris in front of room of founders (who probably want to sell someday)
Due diligence is all about sequencing.
What you share and when you share it matter tremendously. For me, the first call with potential buyers was purely a get-to-know-you conversation.
No numbers, no software details, just high-level discussion about what we each do.
This initial call is crucial for evaluating their seriousness.
If they start trivializing your company early on, that's a red flag.
You need respect, not condescension.
My potential acquirer (a company called Rave) passed this test immediately.
We talked high-level strategy and built rapport from that very first call.
Pro tip: The best way to build trust is to be vulnerable in small, controlled doses.
For my second call with Rave, I showed our software at a surface level, enough to demonstrate value, but nothing proprietary.
I knew they could probably see our app through mutual customers if they really wanted to.
But I'd never show source code.
Next in the sequence:
After showing some software, we pivoted to business discussions.
Next, I shared a financial overview.
I showed a simple deck showing topline revenue, growth rates, and profit trends, without customer-level details.
By that stage, I'd had multiple calls and felt I could trust them.
Trust doesn't happen in one call, it builds over multiple interactions.
Remember:
There's a big difference between showing high-level financials and sharing customer-level details or profit margins.
Start with top-line revenue, growth rates, and general market size.
Hold the detailed P&L until much later.
Don't forget the legal protection!
Everything after the first exploratory call requires an NDA.
The sequence matters:
NDA for basic info
LOI (letter of intent) before detailed financials
Purchase agreement before the real secrets come out
And instead of revealing code, I built a content management system so buyers could see results without inspecting our underlying platform.
For example, I created a content management system for mobile apps that customers could use to make changes without accessing our code.
This same approach works for potential acquirers.
Always demo the results, not the secret sauce.
For bootstrapped founders especially, your buyer will be shocked by things like:
How clean your cap table is (just me and my brother)
The lack of debt
High profit margins
These become selling points, not vulnerabilities.
In my case, we had 60% net profit margins, which raised eyebrows.
Building personal relationships trumps everything in due diligence.
I actually met my eventual acquirer years earlier when I warned them about a sketchy competitor trying to impersonate buyers.
That good deed established me as trustworthy long before acquisition talks began.
The payoff?
When things got tense later, we had a foundation of trust.
Also, the biggest mistake in due diligence is rushing.
I shared more than necessary because we were trying to close in 3 months during the holidays.
With a longer timeline, I would have more carefully organized what to share and built in protection against their requests.
Preparation matters too.
Organize your finances, clean up old contracts, and systematize processes before you ever go to market.
Buyers want to see a business they can acquire and operate smoothly, not a complicated mess.
Due diligence is like dating, you reveal more over time as trust builds.
You wouldn't share your deepest secrets on a first date, and you shouldn't share your company's crown jewels in early acquisition talks.
Sequence matters. Trust matters more.
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When COVID wiped out her luxury event business, Virginia had to completely reinvent her systems to keep up with the growth of her business.
By turning her workflows into software, she launched Partytrick, a SaaS company now on track for $15M ARR. What started in crisis became a better business than she ever imagined.
Check out the latest episode of the Startup Different Podcast here!
Thanks for reading!
Dave