Fundraising a traditional search SaaS - question & caveats

July 27, 2023

by a searcher from Roosevelt University in Boston, MA, USA

With about 30-35% committed to our search capital thus far, I am actively fundraising for the middle portion of our search capital. Most of our committed investors have investments in search funds and/or SaaS SMBs. I am about 2 months into fundraising.

Here is what's interesting: I have spoken with 5 or 6 additional investors who have expressed interest in backing our search (met with them twice, have SaaS investments, and said they like my profile) BUT they stop short of giving me a firm commitment -- instead they ask me to reach out after I have raised ~50% of the search capital. Sometimes they tell me, "It doesn't make sense for us to come in early". While that is not a no, it is also not really a yes. Again, I want to reiterate that these are usually very positive conversations.

Does anyone know why this happens or what the thinking behind an investor asking a search entrepreneur to reach out later?

**If you are a SaaS investor or post-acquisition searcher, feel free to send me a message. Would love to chat!

Reply by a searcher
from Southwestern University in Houston, TX, USA

There's a story of a guy who was paid big dollars to do in-depth analysis of sites for a fast-food chain's next purchase. He charged *a lot* of money, but his analysis was always spot on. Eventually, the chain discovered that all the guy was doing was finding where McDonald's has placed their latest restaurants and found land nearby because he know how exhaustive McDonald's process for siting was and didn't see the need to re-create the wheel.

Your potential investors are essentially doing the same thing. They are conserving their own time by waiting for a known name to invest in you. Since they know most of the big names in search funding, they know the process they go through before they invest. Your potential investors are just piggybacking off of the major search investors' work to increase their own win percentage. It's a way that they can get the benefit of direct investment while also getting the benefit of being in a fund with a known player.

It would behoove you to concentrate your efforts on some of these bigger, better-known players for your initial investments (even if they're tiny participants) because of this tagalong factor.

Reply by a searcher
from Indiana University at Bloomington in New York, NY, USA

Thanks for the tag ^redacted‌! I'm happy to chat any time ^redacted‌ about my experience raising and you have a lot of great comments here already, also want to highlight as someone who received some of the same feedback you did (circle back once I reach XX%...), many investors also noted how unprecedented this year was in terms of the sheer number of searchers raising and so they were either fully committed or close to committed even by March / April of the year, so I would keep that in mind as well. So all told it's a very active year which is great in some ways and challenging in others, but it's really a good sign you're gaining traction with the raise (congrats- you'll get there!), feel free to email me to chat more if you'd like: redacted

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