Experience/insights for raising capital for a smaller size deal?

July 28, 2023

by a searcher from INSEAD in New York, NY, USA

I've come across a deal that is too small for a typical search fund deal but I would need to raise external capital to finance it. Does anyone have thoughts on the best types of investors to approach/how to structure such a deal?

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Reply by a searcher
from Harvard University in Boston, MA, USA

There are plenty of investors you can approach on this platform (look through the directory / post more info here) - my high level model is aim for 30%+ IRR - either use a preferred return or give them an equity step up (IE they put in 10% of the capital but retain 15-20% of the equity) to get that 30%. If it's an SBA loan no one will want a PG so you'll have to make sure any individual investor has < 20% equity.

Reply by a searcher
in Rindge, NH 03461, USA

I am a big fan of significant seller financing to keep them engaged and motivated to help the transition be successful. Balance with cash, investors, other lending.

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