Standard investor terms for US self-funded search
March 05, 2025
by a searcher from University of California, Berkeley - Haas School of Business in Los Angeles County, CA, USA
I'm kicking off a self-funded partnered search in the US (geographically focused but open across industries). We're trying to dial in our buy box based on how much equity dilution we're willing to accept if we take on investor capital. I know there are many creative ways to structure investor terms, but are there any good resources to use as a starting point to get a clearer sense for what different levels of investor capital will mean for the equity distribution / cap table?
from McGill University in San Diego, CA, USA
This article is also quite good: https://bentigg.beehiiv.com/p/selffunded-sba-acquisition-structuring-explained?utm_campaign=welcome-to-the-smb-scoop-newsletter-by-ben-tiggelaar&utm_medium=newsletter&utm_source=bentigg.beehiiv.com
in Asheville, NC, USA
- 8-15% preferred return
- 1x liquidation preference
- 1.5x - 2.5x step-up
- IRR's need to pencil out above 30% in your conservative model.
Where you get a little more wiggle room comes down to the actual company and distribution specifics.
- The higher the risk of failure, the higher the return needs to be.
- If you can return investors' initial capital and pay off the pref early, they're willing to accept slightly lower terms. (and by early I mean in under 2 years)