How do you simply explain search to family and friends?
October 30, 2019
by a professional from University of North Carolina at Chapel Hill in Atlanta, GA, USA
How do you explain search funds to friends and family? Are there any analogies you've found helpful?
in United States
Even with a good set of cards dealt to them, a player doesn't really know what they've got until they see the flop. They've got to put in a small amount (their blinds) in order to see what comes up, and then after that they have the new decision to commit and put in further or fold. There is a risk they'll lose their blinds, but it's a small amount and the price they happily pay to see if they actually have a good hand.
As a searcher raising a "search fund", you are asking investors to put up a small amount upfront to fund your search. In return, they get to have a look at you, to see how you'll be as a future leader of the acquired company, as well as what company you find. If they don't like what they see, they have no commitment to go-in any further and they can fold, knowing that they may lose their initial investment into your search. However, if they like you and the company, they then have an opportunity to put in a much larger amount money and proceed with you & the company. The investors you are looking for that have the ability to write the acquisition cheques down the road, to them the small search investment up front is like the small blinds that they would be putting in. A cost - yes - but in business as in poker, you've gotta pay to play the game and get the potential for the reward.
from The University of Auckland in Los Angeles, CA, USA
Ultimately I accepted (and respect) that some people can only understand life as an employee and simply cannot understand anything else. It's not age - even my younger brothers have no understanding, no interest. We should not blame however. It's hardwired. It's like Westworld - "Doesn't look like anything to me." My father went to his grave with zero grasp. Ironically he could have made a fortune using this approach but could not grasp it (the cruel tyranny of a closed mind).
Hopefully they just get it, otherwise don't bother. Also be prepared - if they don't understand you they will probably not support you. This is actually a real blessing as you will thrive and flourish independently, without the constraining opinions of others. You already possess everything you need to do this.