Self-Funded Search Investors - Any stories of failed investments?

searcher profile

October 02, 2024

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

The line "All I want to know is where I'm going to die so that I never go there" has always resonated with me. (Charlie Munger, I think)

I'd be curious for folks who have been investing in self-funded searchers or other ETA / search / independent sponsor deals for a longer time what some of the ways are that you've seen investments go belly up. And if you have lessons learned from those experiences, that would be fascinating to hear!

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Reply by a searcher
from The University of Chicago in Chicago, IL, USA
I've heard several stories, some first-hand. Usually issues come from 1) seller is deceptive, 2) too much leverage, 3) project based businesses / poor industry timing. #1 comes up in a lot of failures and near failures, and it's hard to diligence as an investor.

From my investments, the operator has had as much of an impact as the business itself, so having good judgement of the operator is critical. You only figure that out by actually getting to know the person, or developing strong pattern recognition by meeting many of them.
commentor profile
Reply by a searcher
from University of Oklahoma in Plano, TX, USA
This has been my favorite question at conferences and in discussion with anyone in the space. There are definitely stories out there, but harder to find them than successes of course. Here is a recent YouTube video on the subject I watched https://www.youtube.com/watch?v=w0S0tgSccTQ
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