Why I Walked Away From A 6 Figure Stripe App
The digital acquirer is back and on the prowl.
After waving my 75% close rate in a seller’s face to be chosen amongst 2 other interested buyers, I decided to pull the plug after just a week of due diligence. It was only supposed to take two weeks in total. After all, I had the track record to complete such a thorough review and reach a complicated decision in such a short time. I actually convinced the seller not to go with another buyer who promised to complete diligence in a week. I mean c’mon, that’s a stretch at this level. This only makes me look worse, but hopefully it’ll make sense by the end of this. You might wanna grab a snack or a drink.
I spent hours, after a night of disjointed sleep, trying to check myself and ensure that I was ready to walk away from a deal based on an educated guess. I must have edited that “180 degree” of a message a handful of times before I felt ready to send it and ruin their weekend. Before me, they had another buyer who took 4 weeks to decide they wanted the seller’s second and current venture more than the actual app that was for sale! When they couldn’t have it, the deal was dead.
You see, I didn’t end up finding a smoking gun. The seller was actually one of the most transparent and honest of those I’ve gotten this far with. Even after having tons of conversations, including a handful that became serious, I still get nervous when sending sellers that first opening message. It can be a jungle out there. And I was a little rusty after almost a year since my last and third deal closed. But this seller was as friendly and open as could be. Their previous buyer even exchanged emails with me and gave me access to their due diligence docs for reassurance!
The devil ended up being in the details…and my mind. The real reason for my backing out is that I had been burned before. My second deal fell off a cliff within weeks post-acquisition. I was still trying to get skin in the game and ignored warning signs I shouldn’t have. The funny thing is, it’s still earning an okay return on the capital I put in, despite the crater that was left from the subscribers who churned. But if I’m holding myself to the same standard as those who excel in this game do, it was a bad deal. No ifs, ands or buts about it. The only moral victory is that unlike my first purchase, it was in the right category.
So what the hell does a deal from a year ago have to do with this app? They’re in different markets, which was actually a positive for me. Shopify has been a bit unforgiving and if you read my last post, you’d know why. This app was in a different marketplace that had great developer tooling behind it (I’ve used other Stripe API’s recently and was impressed) and was different in all the right ways. Managing Shopify apps is a bit of a sprint at times. Stripe seemed to be more like a steady jog. A welcome change, even if I had to manage apps on two different platforms. Plus, a little diversification never hurt anybody. Just ask Justin Butlion and his growing empire of micro SaaS! The cherry on top was that this would finally be my first acquisition of a codebase written in my programming language of choice: JavaScript.
Here’s where things really started to go south. This business was presented to me as stable. However, the data didn’t back up that story or the excuse that annual vs. monthly subscription renewals was leading to lumpy charts and dips in net profit. If you thought it couldn’t get any spicier, well, just keep reading. The reason I brought up my second deal from around this time last year, was that the tides had shifted *while* the deal was being made. In fact, I found out after that a customer emailed to cancel their $200 monthly subscription on the same day we officially closed and all funds had been wired. They, along with 4 other customers, churned. Some cancelled while the deal was happening and some left after it had closed. I felt like I had been hit by a truck.
12 months and a ~50% reduction in MRR later, it felt like the sands were shifting underneath my feet again. The crazy thing is, the Stripe app isn’t in serious decline…yet. This is where the educated guess comes in. Essentially, MRR peaked in late 2024 until mid 2025 before a slight correction hit. Things leveled off for 3 - 4 months which brings us to today. The data points are limited on the x-axis, but there’s enough cause for concern. Add in an abandoned business, a recent uptick in churn, a dwindling of new customers and we all come to the same conclusion. This business is on the decline. How much of a decline? Hard to say. But for an all-cash, no contingency deal on what was supposed to earn stable monthly profit above a personal hard minimum? Well as a wise man once said, if it’s not a “hell yes!”, it’s a “hell no!”.
Hopefully I’ve redeemed myself from the beginning, but if I haven’t, I’m not holding my breath. As much as I am proud of the fact that I closed 3 deals in 8 months, it came with some war stories. The seller has every right to say “🦆 you, you told me you were going to close”. It hurts even more that they’re a first-time seller on Acquire.com. But if I’m going to last in this game, I need my deals to perform the same for at least 12 months before they crap out. And that’s still a terrible investment based on current multiples in the market.
This brings me to my next point, which is that I’ve actually found what I’m looking for already. No I didn’t move on *that* quickly. Remember when I said I closed my second deal around this time last year? Well right after that closed, my third and last deal fell into my lap just days after. It had great stats, from a well-known, trusted seller and was the perfect situation. I had just enough cash leftover to make the deal happen, so I went for it! It came out of nowhere just when I thought I was done for awhile. Two deals in six months is already asking for trouble. But to add some icing on the cake, it was my quickest deal yet. All the advice I had studied online before doing any acquisitions basically pointed to this behavior as that of a bonafide idiot. I never really identified with the saying “when you know, you know”, but I guess that was me living it to a T. That third deal turned out to be my best one yet. The right business, in the right category, at an incredible price. Now that a full year has passed, the numbers can speak for themselves. Despite some of the headaches and late night stress it caused me, it delivered a ~40% return. What I’m trying to say is, I need to find another one of *those*.
Through the process of getting back into acquisitions after a year of maintaining what I have, I realized SaaS was where I belong and not just because that’s where there aren’t as many gatekeepers. I was losing my focus so I reigned it in and decided to double down on what I’ve already accomplished in the space. By nature of getting the cogs turning again upstairs, I ended up figuring out some off market strategies that I should have a decent shot at executing with the cash I have and some experience under my belt. It’s the only way I’ll be able to find a hidden gem without getting sucked into a bidding war. Something like a late-stage NBA player who stayed out of trouble all those years and continues to contribute meaningful stats or plays each game. As Shaq likes to say, “the others”. There’s something to be said about all this in the midst of Figma’s IPO. In my amateur opinion, VC was long overdue for that kind of win to prove why VC should continue to exist. It’s not completely their fault. Anti-trust picked up and forced everyone to not pay lawyers and financiers a bunch of money for a deal that could get blocked. A lot of the narratives online had shifted towards bootstrapped or lean companies. Maybe I’m in an echo chamber. And AI is making it rain again like the ZIRP era never left. But while everyone else is chasing the next Facebook, there’s a simpler software business out there just printing steady cash every month.
PSA: Somehow we’ve let people be deluded into thinking ARR is what valuations are based on. They’re not. At least not at this level where the software is still pretty immature in most cases. Always calculate the price you need to pay, based on the money you’re actually going to see in your bank account. It’s going to eliminate a lot of delusional sellers from your target list. Thank me later. There’s no shortage of them on Acquire.com and if you’ll allow me to be a bit conspiratorial, I’m pretty sure they encourage it to get them excited about listing on their platform. Don’t let them sell you a fantasy, let alone an inflated valuation. If there’s something magical about the business, then by all means, jack that offer up. But it better be Hogwarts magic, not David Blane magic. And you need to set a realistic hard cap that you hold yourself to if you’re competing with other buyers. Everyone thinks they can be the hero and turn the ship around. In reality, it’s extremely harder than it looks and you can still lose despite doing everything “right”. Unless it truly fits like a glove for whatever reason, skip it and look for something you can handle. I could very well be wrong about the Stripe app. But I’m able to live with myself no matter what happens and walk away for good.
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