Technical Debt: What it is, How Much of it You Can Live With, and How to Incorporate it into an Investment Thesis

Today’s episode is targeted specifically towards those who are considering the acquisition of a software company, and I was thrilled to be joined by Chris Smith, the Managing Partner of Spellbound, a company that helps buyers with technical due diligence, fractional CTO services, and outsourced development services, among other things. Much of what we discuss today is intended to uncover how much "technical debt" any given target company may possess within their code base. Though substantially every software company has some amount of technical debt, those that are weighed down by an asymmetric burden of it tend to ship less frequently, release fewer new features, spend more time fixing bugs, regularly miss release targets, possess code bases that are difficult to build upon, have slower and more complex implementations, and just generally be much more expensive and capital intensive to operate and grow In this way, what sound like purely *technical* problems quickly become significant *business* problems. As a result, prospective acquirors would be well served to thoroughly diligence the amount of technical debt possessed by any given target company, and proceed very carefully (or perhaps not proceed at all) with those companies who seem to possess much more than their fair share of it. A link to the episode is below: https://mineolasearchpartners.com/2025/10/30/technical-debt-what-it-is-how-much-of-it-you-can-live-with-and-how-to-incorporate-it-into-an-investment-thesis/