Why I'm Writing This
Three days ago, I posted on Reddit about walking away from an AppSumo deal after reading their partner terms. The response was overwhelming, with users and founders sharing similar experiences, asking for the full breakdown, and requesting details about the specific clauses that made us pull out.
The backstory: We spent 12+ months building EazySites (a publishing platform for creators). We passed AppSumo's QA process, got accepted to their marketplace, wrote all the copy to their specifications, integrated their license key system, and planned our pricing tiers. We were all in and ready to go live.
Then we read the legal terms. Really read them.
What we discovered wasn't just concerning, it was a systematic trap designed to make exit impossible and success punishable. These weren't standard marketplace agreements with reasonable protections. They were predatory contracts that would have made our business uninvestable and unsellable.
My TL;DR from Reddit: AppSumo isn't just a marketplace, their partner agreement turns them into a silent creditor. If you grow, raise, or get acquired, you might owe them 3x your total revenue just to leave.
But that barely scratches the surface. The full picture is far worse.
The Real Story Behind "Customer Protection"
AppSumo markets itself as a platform that helps SaaS founders reach thousands of potential customers through "lifetime deals." The promise is compelling: instant exposure, immediate revenue, and access to a massive customer base hungry for new tools.
But beneath the marketing lies a web of legal terms so predatory that they effectively transform partnerships into permanent servitude. These aren't standard marketplace agreements, they're carefully crafted contracts designed to extract maximum value from founders while providing zero viable exit strategies.
After analyzing AppSumo's partner terms in detail, the picture that emerges is disturbing: a systematic structure that punishes success, makes businesses uninvestable, and ultimately transfers IP ownership to AppSumo through inevitable breach scenarios.
This isn't about protecting customers, as AppSumo claims. It's about creating a business model where AppSumo wins regardless of partner success or failure.
The fundamental problem: AppSumo has created terms so broad, vague, and one-sided that compliance becomes impossible over time, triggering clawbacks and IP seizure for any partner who achieves meaningful success.
Let's examine exactly how this trap works, starting with how AppSumo positions itself to its end users, then diving into the partner terms that make exit impossible and success punishable.
Appreciate the response, Noah. I've replied to your DM. I'm happy to have a chat, but I'm not looking for a once-off special treatment.
I understand where you’re coming from. Protecting customers matters, and no one wants to see LTD buyers abandoned.
But the core issue here isn’t the intent behind the terms; it’s how broad, vague, and one-sided the enforcement mechanisms are, and what they mean for legitimate founders trying to build sustainable businesses.
No one is arguing against accountability.
Founders should honour their promises.
But right now, the structure doesn’t protect customers, it quietly punishes the ones who succeed.
Let's examine the clauses and see how they paint the picture through vague wording and aggressive language.
Let's start with the end user, for whom these agreements are meant to be in place for, and why they are there, it's for their protection and guaranteed to a "Lifetime deal"
The Appsumo Users (Sumolings)
AppSumo provides a multidimensional digital marketplace where you can buy, sell, and engage with thousands of incredible products and entrepreneurs. But... here are our super-boring (but according to our lawyer, super-important) terms of use.
By agreeing to the Terms, you agree to resolve all disputes with AppSumo through binding individual arbitration, which means that you waive any right to have those disputes decided by a judge or jury, and that you waive your right to participate in class actions, class arbitrations, or representative actions.
By using any of our Services (even if you are just browsing through our site), you’re agreeing to the Terms. If you don’t agree with the Terms, you may not use our Services.
AppSumo is a marketplace where you can buy great products, and we want you to have a great experience doing so. Understand that AppSumo provides the venue where you can purchase Products developed by our Partners, and we do not endorse or guarantee any of their Products and do not assume any liability for them.
We love to make you happy and will provide you with a full refund of the purchase price of a Product during the refund period for that Product for any reason or no reason at all, subject to Section 5B
Our famous Lifetime Deals typically have a 60-day refund period that begins the day you purchase the Product.
Other Products, however, have a shorter refund period.
For example, some deals offer a 30-day refund period, and, if you purchase a digital book, you can’t return that ever!
Section 5B AppSumo reserves the right to deny refund requestsand to limit, suspend, or terminate your account and accounts associated with you if you seek refunds for an excessive number of your purchases or if you are not in good standing with AppSumo.
We determine in our sole discretion what constitutes an excessive number.
You cannot resell any Products purchased using our Services or use them to trade or barter with others.
We also will not provide you a refund, plus you agree to pay us the amount of money you made by violating this provision.
We reserve the right to handle our legal defense however we see it, even if you are indemnifying us, in which case you agree to cooperate with us so we can have our legal strategy executed.
Now let's move on to how the partners are set up.
By submitting a Product for inclusion on the Marketplace or executing a Promotion Agreement.
Partner hereby agrees to be legally bound by these agreements:
Promotion Agreements
Terms of Use
Privacy Policy
Partner Policies
Partner Community Policy
Partner Listing & Updates Policy
Partner Payments Policy
Clawback - (More on this later)
Subject to the terms and conditions contained herein, all amounts paid or payable to Partner by Company shall be subject to reduction, offset, and recovery from Partner (each, a “Clawback”) in the event Partner breaches this Agreement.
Partner agrees to pay to Company the amount identified in such Clawback Notice, along with all costs and expenses incurred by Company. Partner hereby grants to Company, as security for all of Partner’s obligations under this Agreement, including, without limitation.
Any Clawback due and payable to Company and any amounts outlined in Section 1(g) herein (collectively, the “Secured Obligations”)
A security interest in and to the following, whether now owned, or hereafter acquired by Partner, and whether now or hereafter existing (the “Collateral”):
All copyrightable works embodied in the Products, and all Intellectual Property Rights, including all original works of authorship fixed in a tangible medium, published or unpublished, and any copyrights, and including all copyright registrations and applications on file with the Register of Copyrights in the Library of Congress.
In connection with the grant of the security interest set forth in clause (i) above, Partner hereby covenants and agrees in favor of Company as follows:
Partner agrees that it will not register or file an application to register any Copyright with any Copyright Filing Office without, in each case, providing Company with not less than thirty (30) days prior written notice and in each such case. Partner agrees that it will execute and deliver to Company at least ten (10) days prior to filing any such application or registration, a copyright security agreement in form and content acceptable to Company in recordable form in each such Copyright Filing Office. In such event, Partner consents to the filing by Company, at Partner’s expense, of such copyright security agreements in each such Copyright Filing Office;
Partner agrees that, should it obtain an ownership interest in any new Collateral, including any copyright registration or application, any such copyright registration or application will automatically become part of the Collateral;
Partner shall not:
(1) sell, assign (by operation of law or otherwise) or otherwise dispose of or grant any option with respect to any Collateral; or
(2) create or suffer to exist any lien upon or with respect to any Collateral except for the pledge and security interest created by this Agreement.
Partner shall provide a written response to any communications or inquiries from Company to Partner regarding any Product(s), Promotional Materials, Product Listing(s), and/or this Agreement, within fourteen (14) days of Partner’s receipt or any such communication or inquiry.
If Partner fails to comply with the communication, approval, and/or cooperation requirements set forth herein, then Company may, in Company’s sole discretion:
Remove or otherwise suspend the offering of any of Partner’s Product(s) from the Marketplace;
Withhold the payment of any Fees to Partner;
Clawback any Fees from Partner; or
Take any other remedial actions deemed reasonable by Company.
Partner shall provide to Company a functional instance of the source and object code for any Product(s) offered through the Marketplace.
Partner hereby grants to Company an irrevocable license to:
publish
sell
offer for sale
alter
create derivative works from
modify
upgrade
market
publicly perform
copy and/or otherwise alienate the
Product Copies
Promotional Materials
and Product Listing(s)
if, and only if, a Release Condition (as defined herein) occurs. “Release Condition” means:
The dissolution or liquidation of Partner;
Partner’s seeking protection under bankruptcy laws or becoming the subject of an involuntary bankruptcy or an assignment for the benefit of creditors;
Partner’s communication to Company that Partner has or will become insolvent, plans to conclude its business affairs, or may become unable to meet its obligations under this Agreement;
Partner’s failure to perform its obligations under this Section; and/or
Partner’s breach of any representations or warranties under this Agreement.
During the Term, Partner hereby agrees that it shall not:
Affect any changes, modifications, upgrades, or other differentiations to the Product(s) (“Product Changes”) without first providing Company with fourteen (14) days’ advance written notice detailing the nature of any such Product Change(s).
Company reserves the right to review, request additional information related to, and/or reject any such Product Change.
If Company rejects any such Product Change(s), then Partner shall continue to offer the Product(s) as such Product(s) then-currently exist on the Marketplace.
What constitutes a breach of this agreement?
Before we take a look at what constitutes a breach, please note that anyone listed on the marketplate has no exit; there is no possible way to turn it off.
Keep in mind that, unlike AppSumo Select or traditional limited-time-offer “deals,” self-listed AppSumo product listings are designed to be evergreen in nature.
All self-listed products are deliberately intended to never expire.
Ideally, your product listing page on our marketplace serves as an ongoing source of revenue, exposure, feedback, new customers, and key insights, all in addition to your regular sales platform and marketing efforts.
But, at a minimum, Partners are required to maintain their listing for 120 days after their product listing goes live on AppSumo.
As an AppSumo Partner, you agree to:
Maintain your listing for at least 120 days after your product page goes live.
Only deals that have been live for a minimum of 120 days are eligible to be paused.
The maximum length of time a deal can be paused is 6 weeks.
AppSumo reserves the right to delay the start of the pause to give customers some time to purchase before the pause takes effect.
It can be very disruptive when Partners leave, so if you do remove your listing within the first 120 days, understand that AppSumo may void payments you otherwise would have been entitled to in connection with the sales of your product and prevent you from listing products in the future.
Update your listing appropriately whenever product changes occur and communicate any new upgrades, modifications, or changes to your product with your existing AppSumo customer base.
It is at the sole discretion of our Partner Success team to either approve or deny any requested updates submitted via the form, so submitting the form in no way guarantees such updates.
Product listings on AppSumo must be priced at a uniquely low price (aka a ‘lower than anywhere’ price).
This means that it has to be below the lowest price for the offering found anywhere else.
Understand that if we see any pricing practices that we consider to be taking advantage of our customers or AppSumo, even beyond those listed above, we will take actions that we deem appropriate to stop such practices from occurring in the future.
Not that we don’t trust you, but… AppSumo regularly monitors the prices of products, both on our own marketplace as well as on other platforms and retailers.
The final trap
Under these Partner Terms, AppSumo has structured its agreement in a way that can materially burden a future acquisition, unless the buyer agrees to take on all obligations, which is unlikely without negotiation.
Let’s unpack this in two parts: (1) the lien problem, and (2) the successor liability enforcement mechanism.
1. AppSumo Has a Security Interest (Lien) on the IP
In Section 1(f), AppSumo requires the Partner to grant it a UCC Article 9 security interest a lien on the copyrights and related intellectual property underlying the product:
“Partner hereby grants to Company, as security…a security interest in and to the following… all copyrightable works embodied in the Products, and all Intellectual Property Rights…” (Partner Terms, Section 1(f)(i))
This means:
The IP cannot be sold, transferred, or encumbered (e.g., to a buyer or investor) without clearing or subordinating AppSumo’s lien.
AppSumo may have the right to foreclose on or restrict use of the IP if the Partner defaults under the Agreement (e.g., fails to support customers or breaches exclusivity).
Due diligence will flag this lien as a major cloud on title to the IP, making it unattractive or impossible for an acquirer to proceed without resolution.
2. Why Would a Successor Assume the AppSumo Agreement?
In most cases: they wouldn’t, unless:
The Successor wants to avoid the 3x “Transaction Liquidated Damages” under Section 14(g)
“Partner and Successor Entity shall be jointly and severally liable…for an amount equal to three times (3x) all Fees paid… unless Successor Entity assumes all of the obligations and liabilities…”
Refusing to assume means paying 3x total fees paid, a massive penalty that could eclipse the value of the transaction, especially if the AppSumo campaign was highly successful.
So most rational buyers will either:
Walk away from the deal or demand price adjustments
Require the seller to settle or buy out the AppSumo agreement and lien
Try to renegotiate the Partner Agreement prior to closing
What about funding & Investment?
Investors will scrutinise this agreement hard, especially during due diligence, because it affects both the company’s upside (IP value) and downside (legal exposure).
Appsumo partners do not fully own their IP, a deal-killer for many institutional investors.
Venture Investors Will Ask:
“Do you have any third-party liens on your IP?” (Yes - AppSumo)
“Can you transfer your IP freely to a buyer?” (No, not without AppSumo’s cooperation)
“Are there any agreements with penalties for exiting or discontinuing products?” (Yes - 3x liquidated damages)
“Can we sunset your AppSumo deal without risk?” (Only with a long tail of obligations, including support and clawbacks and no way to delist from their market place)
Conclusion: The True Cost of "Free" Distribution
AppSumo's partner terms reveal a business model built on founder desperation and information asymmetry. They offer immediate distribution in exchange for permanent control, betting that most founders won't read the fine print or understand the long-term implications.
The reality is stark:
No legitimate exit path exists - Partners can only "pause" for 6 weeks, never truly terminate
Success becomes a liability - Higher revenues mean higher clawback exposure and 3x penalties
IP ownership is compromised - The security interest makes businesses uninvestable and unsellable
Breach is inevitable - Vague terms and impossible compliance requirements ensure eventual default
For investors and acquirers, these terms are deal-killers:
VCs won't invest in companies that don't fully own their IP
Acquirers won't assume indefinite third-party obligations
The 3x liquidated damages penalty often exceeds transaction values
Due diligence flags these agreements as major red flags
The pattern is clear: AppSumo has created a system where unsuccessful partners lose their revenue, and successful partners lose their entire business. The only consistent winner is AppSumo, which gets free products, eventual IP ownership, and protection from any meaningful legal challenge.
This isn't a partnership—it's predatory lending for SaaS, dressed up as a marketplace.
Founders desperate for distribution may be tempted by AppSumo's promises, but the true cost isn't the 60/40 revenue split—it's the permanent surrender of business autonomy and the systematic destruction of long-term value creation.
The choice is simple: Build a sustainable business with real partnerships, or sign away your future for short-term distribution that comes with a lifetime of strings attached.
For any founder considering AppSumo: Read the terms. All of them. Then ask yourself if temporary exposure is worth permanent servitude.
The answer should be obvious.
A Final Note to Noah and the AppSumo Team:
I genuinely believe AppSumo started with good intentions and has helped many founders get their first customers.
The platform has real value, and the community you've built is impressive.But somewhere along the way, the legal terms became predatory.
These aren't just protective measures, they're systematic traps that make success punishable and exit impossible.
Noah, if you're reading this, I'd welcome a conversation.
Not about special treatment for my company, but about how AppSumo can return to being the founder-friendly platform it once was.
The current terms don't just hurt individual founders, they damage AppSumo's reputation and long-term sustainability.
There's a path forward that protects customers without destroying founders. I'd be happy to discuss what that might look like.
This analysis is based on publicly available AppSumo partner terms and user agreements. All quoted text is taken directly from official AppSumo legal documents.