Last week, I posed a scenario asking about potential risks or issues for acquiring a small early stage startup.

Congratulations are in order. You’re about to close on acquiring an early stage tech company. In this particular case, the product is a unique take on one of your core products and they are involved in the open-source community. You’re much more interested in the people behind it: the technical founder and half a dozen employees. It is engineering heavy, but they do have at least one person full time managing the operations aspect. To keep their infrastructure costs as simple as possible, they do as much stuff as they can on the cloud.

From one list member Demetrio:

Retention of staff, operational integration (especially for items in the cloud), how to continue with open source support without degrading product offerings, confirming the tech founder aligns with ones mission, and probably last is ensuring the why?

He does highlight the primary goals that we stated of staff retention and cover some of the high-level areas.

Here’s what I can tell you through the tech diligence lens:

  1. All infrastructure is cloud based. This makes things a little easier to migrate as they will more than likely be going with one of the primary accounting packages and an office like suite (Microsoft or Google).

  2. The open-source part is key and more than likely means their IP will be on Github and one of the top three US based cloud providers (AWS is the most prolific with Google Cloud as #2 due more to the freebee offerings for startups). Additionally, their source code will be publicly available for their core offering while the stuff they consider as their value add will be private.

  3. Because of #2, their development/release process will try to leverage the Github platform as much as possible including all project artifacts and infrastructure. Transitioning this could pose issues assuming…

  4. Open-source licensing and the community surrounding it. It isn’t a show-stopper as I mentioned earlier in the week, and as I’m sure your attorneys would attest to. Depending on the OSS licenses involved would dictate how best to handle the transition. Especially if their special sauce is licensed under different terms than what is publicly released. This dictates whether it can be touched, incorporated, or released to the world as an OSS project.

  5. From a security/governance standpoint. A lot of people have keys to things they normally wouldn’t have in a larger organization not to mention the lack of auditing/process. This will require care during and after close since you want the people being on-boarded to be happy as this is the main reason why you are purchasing them to begin with.

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