Compliance Debt: The True Exit Price Killer
We've shared the story of how we watched a startup lose 96% of its initial valuation during an exit.
They weren’t bad people. They had a great product. But they had massive "Compliance Debt."
When you ignore things like GDPR or privacy laws in the early days, you aren't saving money. You are borrowing it against your future exit price. And during M&A due diligence, the buyer makes you pay it back with interest.
Here are the 3 ways compliance debt kills your deal:
The Due Diligence Slash: Buyers look under the hood. If they see regulatory risks, they calculate the potential fines and subtract that total directly from your purchase price.
The Rewrite Risk: If your code wasn't built with compliance in mind, the acquirer has to rebuild it. They will deduct those engineering costs from your payout.
The Competence Hit: If you were sloppy with compliance, investors wonder what else you were sloppy with. This destroys trust and kills your premium multiple.
Don't wait until the Letter of Intent arrives to think about governance. Protect your equity by taking compliance seriously upfront. Have you ever seen a deal value drop due to "non-technical" debt?
