raising capital for platform strategy

January 30, 2025

by a searcher from University of California, San Diego in Portland, OR, USA

looking to the searchfunder community for guidance on the right type of equity investor for a thematic sector play that will require follow-on financing for both acquisition and growth. having positive conversations with middle-market private equity but find fund structure to be a limitation and a lack of creative thinking by way of value creation. anyone run a build-up strategy that drew on deep industry and market expertise? many thanks!

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Reply by a searcher
from Harvard University in London, UK

Thanks ^redacted‌ for the tag. There is no silver bullet here (if someone has found it, please do share with me :)). I think finding right investor is dependent on the sub strategy you want to follow. In my experience raising funds for a roll-up play is slightly easier as you can define a goalpost i.e., buy X companies, get to Y EBITDA and sell within Z years to a PE company. On the other hand if you want to build a constellation style long term holdco, exit options are less tangible. In either case you can choose to have an economic model that is similar to PE (2/20), VC (20% diluation in each round) or Search fund. My experience is PE investors like the PE model but the economics don't work for a SMB platform.

Not sure if any of this helpful, but happy to chat morer iif you DM me

Reply by a searcher
from University of South Florida in Chicago, IL, USA

Thanks ^redactedwe seemed to have cracked this code as all of our current investments require additional equity raises (for the next 5 years) leading to investor dilution...with many interested investors waiting in the wings excited to jump in. Our partners and investors all add value to our platforms. Happy to chat if this if it would be helpful.

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