Investor Fees for Participating In Self-Funded Search Investment

Maybe this is a separate thread, but should we assume all self-funded searchers are self-funded by choice?

Is the question targeted towards search expenses generally, or diligence expenses for the deal? Expenses not directly related to the deal like foregone salary, office expenses, CRM/marketing/website, and travel expenses for previous deals should be borne solely by the searcher. The risk the searcher took in incurring these expenses should be reflected in the larger equity position of a self-funded searcher compared to that of a funded searcher.

My view is that diligence expenses directly related to a self-funded deal (legal, accounting, other diligence, etc.) could be converted to equity, refunded to the searcher, or a combination of the two. I'd recommend the searcher communicate clearly to potential investors how they intend to handle these expenses and strongly consider what signal it sends. Investors should be looking at the deal as a whole, but I agree with Greg that rolling these in as equity will be more palatable.

As an investor, I wouldn't want the new CEO (with a majority ownership) so strapped for cash that they make myopic decisions to create some breathing room on their personal balance sheet. Conversely, I'd be hesitant to see a self-funded deal with zero co-investment - I would view diligence expenses converted to equity as co-investment.