I'm new to the ETA world and was planning to launch a search fund, but am drawn more and more to a self funded search.
I'm just trying to understand how outside equity gets allocated when I'm also putting money down myself.
I'd appreciate your input on the following (simplified) example:
Price $1.25M
250k deferred payment
500k loan
250k personal/buyer contribution
250k third party investors
In this scenario, does the ownership become 50/50 between me and the investors, as we've both put 250k?
Or do the investors own 20% as they've invested 250k in a 1.25M company?
It seems surprising that they would instantly own 625k (50%) of the company value for a 250k investment.
How is this usually treated?
Many thanks in advance!
Allocating equity in self-funded search
by a searcher from KEDGE Business School
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
Your next question is what value have you, and will you, create for investors over and above the cash you are putting. Sourcing the deal, running the business etc. You should use the materials around Traditional Search Fund economics as your starting point to answer these questions.