How to cultivate investors for self funded search pre-LOI?

January 20, 2024

by a searcher from Georgetown University in Brooklyn, NY, USA

I’m at the beginning of the process for my self-funded search, targeting businesses with $750k-$2M EBITDA, and anticipate needing some investors to put in ~10% of the deal. Are there any suggestions or tips on how to cultivate investors, from the initial stages of the search before you find a deal, through the LOI? What are key points to communicate (especially pre-LOI), and how to keep them warm so they are primed when you have the LOI ready? I’ve never raised money before, looking for any perspective.

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Reply by a searcher
from Columbia University in New York, NY, USA

Hi Mitchell - If you can find investors, whether on Searchfunder, your network, lists like this one shared by Pursuant Capital (https://forms.gle/r6JqrBjDqRPfp4xP9), its helpful to learn their areas of focus, whether by industry, geography, size, etc. (sometimes noted on their websites/lists) and if you find an opportunity in their area of interest, it wouldn't hurt to engage early but more substantive conversations can occur post-LOI... (but I would defer to investors for more informed comments here!)

Reply by a searcher
from Northwestern University in Washington, DC, USA

Hi Mitchell. Great question and curious to see the responses here. I would start with clarifying your investment thesis and intended areas of focus. As you network with potential investors this will help focus who to target and help you stand out. I also like the idea of sharing a quarterly update with potential investors per Jerome's point. Have had a few searchers do this with me where focus areas intersected. It established a connection ahead of a qualified deal. A good opportunity will also help attract investors! But I personally would want to have a list of interested investors ahead of time.

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