Acquisition Target's CTO Was Running a Competing Side Business — Found on Product Hunt

Background

A PE firm was acquiring a SaaS company for $15M. As part of digital due diligence, TraxinteL was engaged to conduct deep background checks on the target company's founding team.

Investigation Methodology

1. Product Hunt & Startup Database Search: We searched Product Hunt, Crunchbase, AngelList, and similar platforms for any products launched by the target company's key employees.
2. GitHub Code Analysis: Public GitHub repositories associated with the CTO were analyzed for code similarities with the target company's product.
3. IP Assignment Verification: We checked whether the CTO's employment agreement included IP assignment clauses and whether the side project was developed during employment.

Key Findings

• The CTO had launched a competing product on Product Hunt 4 months prior to the acquisition offer, under a different company name.
• GitHub analysis showed significant code overlap between the competing product and the target company's codebase — suggesting company IP was used.
• The competing product had already secured 3 paying customers and was generating approximately $8,000/month in recurring revenue.

Outcome

The discovery created an IP ownership dispute that needed resolution before the acquisition could proceed. The acquisition price was renegotiated downward by $2.5M, and the CTO was required to assign all IP rights and shut down the competing product as a condition of closing. Total investigation time: 2 weeks.