Private Equity Diligence

Private Equity Diligence Vibecoding Private equity Private equity bros are no longer asking does this product work they're turning to each other and asking can we just build it ourselves and apparently Bain Capital is already doing it They've started vibecoding to see if they can recreate the core features of a target company's product in only a matter of days It apparently started in 2023 with a dedicated team of engineers but now they just have consultants that know how to use Claude code They've built hundreds of prototypes and are calling it outside in diligence This is the part that should make a lot of enterprise software founders nervous Deal teams are no longer asking is this good software they're asking is this software or just a workflow wrapped in a pretty user interface because they realize that those are very different things when it comes to what you're actually paying for One investor at Bain Capital even told the Financial Times that they walked away from a bid because their clone was just too good It was about time that investors started doing something like this Private equity led tech deals have taken a massive hit this year and the best example of this is Thoma Bravo hands Medallia to lenders in one of private equity's biggest losses Thoma Bravo LLC Add to myFT Thoma Bravo hands Medallia to lenders in one of private equity's biggest losses Blackstone-led consortium to take over software company and inject $150mn to help cut its debt load Orlando Bravo, co-founder of Thoma Bravo, has admitted the firm overpaid for Medallia, which sells chatbots to automate customer service queries. © Patrick T. Fallon/AFP/Getty images away from a company called Medallia. The company is experience platform think surveys and feedback to find out what their customers actually think of them. Thoma Bravo bought the company in 2021 for $6.4 billion and they just handed the keys to the lenders and walked away with nothing. They realized that Medallia had no proprietary data and no moat when AI can generate those insights faster than any software ever could. So they decided to walk away from the company and Medallia became the second largest private equity loss in the industry's history. So if I had to read the tea leaves, Bain won't be the last one doing this and this is just what private equity diligence looks like now. The major question should be prepared to answer when private equity comes knocking isn't what does your product actually do. It's what about your product is impossible to just prompt into existence?