Self Funded - Deploying Capital to Source Proprietary Deals

February 16, 2025

by a searcher from Loyola Marymount University in Los Angeles, CA, USA

Looking for some advice—I'm preparing to acquire a business and considering how much capital to invest in sourcing off-market deals. I have run a size-able lead generation business in the past so I have several strategies I know I can use to source these deals. I am however concerned that this may leave me in a position where I do not have enough liquidity to actually close on a deal that I find.

Should I go all-in on finding the right deal first, even if it means using a significant portion of my capital, or should I prioritize lining up investors now to understand their criteria and deal structures before committing too much? I am doing this full time and want to give myself the best chance of acquiring something by the end of the year (preferably within 6 months).

Would love to hear from those who’ve been through this—what’s the smarter approach?

***Adding to this - If you had $150k to put to work solely to find a deal. Where would you place it?

Reply by an investor
from McGill University in San Diego, CA, USA

Hey Michael. Good Q. There are two components to your Q. The first is how much to set aside to pay for your search. Costs include CRM, website, email, calendar to name a handful of the tech tools you might need (there's a longer list). You also need to set aside money for deal costs/ service providers (lawyer, accountant, consultants). Searchers will also spend money on VA's, river guides, travel, trade shows, conferences, networking, etc, These expenses add up over time, especially if you have dead deal costs. If you do a local search, and search for about a year, this could run you $75k-100k (some searchers will surely do it for less). The second component is how much to set aside for your down payment. This is much harder to answer because it depends on your financial goals. If, for example, you are looking to make $150k per year as CEO and want to walk away with many millions in 5-7 years for now, that would argue for going after a way bigger asset than if you had more modest expectations. Your banker will likely want to see you contribute 1-3% of the deal size. If you would like to learn more about the economics of a self funded search, and what investors are looking for, this is a pretty good video: https://www.youtube.com/watch?v=y7qRva9ID6s

Best of luck to you

Reply by an investor
from New York University in New York, NY, USA

HI Michael - I would definitely recommend speaking with investors early in your process to understand what they are looking for, so you have that in mind when you are looking at opportunities. Sourcing is important, but you also need to make sure that you can get the deal funded and closed. I'm happy to have a chat - you can DM me or reach me at redacted

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