Tech Due Diligence for SaaS Companies

SaaS businesses have unique technical characteristics that require specialized due diligence. Multi-tenancy architecture, recurring infrastructure costs, customer data isolation, and the ability to scale efficiently all directly impact the business model.

A SaaS company’s technology isn’t just supporting the business - it is the business.

SaaS-Specific Technical Risks

Multi-Tenancy Architecture

How tenant isolation is implemented affects security, scalability, and cost:

• Shared database - Cheapest but highest risk. A bug can expose one customer’s data to another.
• Schema-per-tenant - Good balance of isolation and cost.
• Database-per-tenant - Best isolation but expensive and complex at scale.

We assess the current approach and whether it’s appropriate for the target’s growth stage and customer requirements.

Infrastructure Cost Scaling

SaaS margins depend on efficient infrastructure. We analyze:

• Cost per customer - Does infrastructure cost scale linearly with revenue, or worse?
• Cloud spend optimization - Are reserved instances, autoscaling, and cost controls in place?
• Database efficiency - Are queries optimized? Is there unnecessary data duplication?
• CDN and caching - Is the application using caching effectively to reduce compute costs?

Churn Risk from Technical Debt

Technical issues drive churn:

• Slow performance frustrates users and increases support load
• Bugs and downtime erode trust
• Missing features delay customer acquisition
• Poor UX from rushed engineering creates perception problems

We assess the technical factors that contribute to (or could cause) elevated churn.

Vendor Lock-In

• Cloud provider dependency - Is the application deeply coupled to AWS, GCP, or Azure-specific services?
• Third-party SaaS dependencies - What happens if a critical integration partner changes terms or shuts down?
• Database lock-in - Can the application migrate to a different database if needed?

Data Architecture & Analytics

• Data pipeline maturity - Can the company extract business insights from its data?
• Customer data isolation - Is there clear separation between tenants?
• Data export and portability - Can customers get their data out? (Important for enterprise sales.)

SaaS Metrics That Require Tech Validation

Not all SaaS metrics are what they appear. Tech DD can validate:

• Uptime claims - What does the monitoring data actually show?
• Feature velocity - Is the team shipping, or is technical debt slowing them down?
• Scalability headroom - Can the platform handle the projected growth without re-architecture?

For SaaS Investors

Whether you’re a VC evaluating a SaaS startup or a PE firm acquiring a mature SaaS platform, SaaS tech DD helps you understand the true health of the product and the sustainability of the business model.

See our checklist for the full assessment scope, or review common red flags in SaaS codebases.