For those of you who have been active as investors in the search space...
February 24, 2025
by an investor from Columbia University - Columbia Business School in Seattle, WA, USA
I'm interested in investing in SMBs, either directly as part of searcher's fundraising or through a search fund.
For those of you who have been active as investors in the search space, I was curious to learn about a few things:
1) How did you come across the opportunity to invest? By networking with searchers?
2) What's the typical size of investments you've made? Or what's typically the minimum requested by searchers? Obviously depends on the size/nature of the deal, but wanted to get a sense of range. $50K? $100K?
3) If you've made a few investments, did you set up a LLC or other entity structure for tax purposes? (so you can run investment related expenses through them?)
4) For those of you who've invested in Canadian deals from the US, did it present additional complexities/challenges beyond the obvious FX risk? (e.g., tax complexities, difficulty in moving the money, etc).
Thanks!
from Sophia University in The Woodlands, TX, USA
After 3 years of searching (and 2 near catches), I found an opportunity that aligns well with my criteria. Quick snapshot: • Revenue: $1. 4M • SDE: $350K • Purchase Price: $1.1M • Strong Financials (with MSA’s in place and annual recurring revenues) • Seasoned Team of professionals in place • Industry: Well Drilling and Pump Servicing Co; high barrier to entry industry • 3-months backlog of sales booked year round. I’m thinking of targeting a non-SBA Commercial loan; 50-60%+ LTV, contributing $220K of my own capital, and seeking investor funds to bridge the gap with a preferred return until principal & interest are fully repaid. I am not opposed to PG's and can offer the Investor first rights to any further growth capital requirements. What I bring: • 14 years of industry & leadership experience • A trusted team of subject matter experts • A robust reinvestment-first strategy: I do not need to draw a salary from this acquisition—100% of first-year profits (after Debt Service & investor paydown) will go straight back toward scaling the business.
• Solid growth plan to bring sellers 'spun-off services' back to the same $5 mil revenue they were at 7 years ago. Would this be something oof interest to you? This is my first time pitching the opportunity, so I appreciate your time. I’m currently working on a more formal teaser, but I’d love to chat if this aligns with your investment focus. Feel free to ping me at redacted if you’d like to discuss further. Appreciate it!
from University of Baltimore in Denver, CO, USA
1) Networking and supporting searchers and being involved in the space is the biggest driver of deal flow.
2) Currently, we're comfortable investing up to $800k or so per deal, with a focus currently on only self-funded searchers.
3) Currently, we have a fund, so we are structured in that way. Before that, I had a holding company and a management company, with the equity positions held under the HoldCo.
4) Have not pursued non-US deals in a while, given the challenges we faced when we had a couple of UK businesses in the portfolio.
As with everyone else, more than happy to chat with you or others interested in the space.