SEARCH FUND MODEL VS SPONSORLESS MICRO-PE FUND
We're a small team who have prior acquisition experience through own deals and under another PE fund, specialized in operating online businesses and have decided to move towards a fund model to buy and grow our own portfolio of SaaS companies.
The previous way we've always done it has been sourcing deals with a fundless sponsor route and would go around raising equity Post-LOI, during due diligence from several investors ($50-$100K checks) to get the deal closed (all under $3 mm in valuation).
As this is something we want to commit to a full time basis, build a solid track record under existing team with 2-3 deals before going to raise an actual PE Fund, we want to explore the search fund model. This model is new to all of us (can see more team at horizencapital.com). We have a very defined target of companies, solid due diligence process and investment thesis. We think it would help in being able to focus all our efforts on the company vs trying to solve our cash flow to pay bills from our own savings/doing consulting work, etc. until we can close a deal. The other big benefit we like is the speed in which we can close on a deal vs raising from many individual investors and the mind share/time of managing investor relations with 10+ investors vs 1.
Would love to hear other members thoughts on comparing these models and how would you suggest getting started in meeting LP's who understand this model to explore if it's even the right fit? Would also be interested to know the details of how much you'd suggest raising for this and how you've budgeted the search fund around 3 partners?
Thanks in advance!