Self funded: Is anyone actually getting 8% + 20% terms?

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December 29, 2020

by an investor from University of California, Berkeley - Haas School of Business in San Francisco Bay Area, CA, USA

I heard of self funded searchers offering 8% perf plus 20% of the upside to investors. Is anyone actually getting these terms?

I spoke to several potential investors recently and generally understood that investors are looking for 8-14% plus 50-70% with performance tiers depending on deal attractiveness, etc.

I can see how one could raise perhaps $500k or so from small unsophisticated investors and friends on very searcher friendly terms.

However, has anyone here actually raised a larger amount of equity ($2-5M) on terms anywhere close to 8% pref + 20% of upside?

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commentor profile
Reply by an investor
from University of Pennsylvania in Washington, DC, USA
I'm an active self-funded search investor (7 deals in 2o20) and recently spoke at a Searchfunder webinar "Tips for Self-Funded Search from an Investor" where I laid out the data and terms I've been seeing in deals. I've put together a slide deck that happy to share to folks - DM or redacted
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Reply by a searcher
from Northwestern University in New York, NY, USA
I believe the way the calc works is Outside equity / Enterprise value times a step up (which ranges from 1-3x), so if outside investors contribute $500K on a $5M enterprise value deal (10%) and get a 2x step up, it would calc to 10% times 2x=20%.
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