Self funded search pre-LOI funding risks
February 17, 2022
by a searcher in Houston, TX, USA
What should a self funded searcher's expectations be about securing soft commitments pre-LOI?
I'm looking at deals between $500,000 and $1,500,000 EBITDA and EV between $1,000,000 and $3,000,000.
I began my search last year and messaged a couple of investors pre-LOI and simultaneously kept searching for deals, refining my deal criteria, developing and systemizing my search process, and learning every day. I ended up messaging dozen of investors but gained virtually zero traction which was not good but okay since post-LOI interest would be the better bet so I kept going.
I got under LOI on a deal that was a great fit for I was looking for and got family and investor backing. Post-LOI was the better bet than trying for the pre-LOI soft commitments.
The wise thing to do is 'start relationships early' in the search because it's what a prudent searcher does to avoid heightened risks that come with starting from square 1 to fund a project in post-LOI; but even last year when I messaged dozens of investors I wan't able to get one intro call from that sample of about three dozen. The sample size isn't big, but what expectations should I have or what information should I be sharing in my initial outreach that would be helpful as I continue I moving forward? Thank you so much in advance!
from University of Pennsylvania in New York, NY, USA
If they are, it'd be really weird for them to not take an intro call with a searcher as that is a prospective future investment for them, so I'm surprised that out of 3 dozen outreaches, only 1 responded.
There are guys that are pretty active investors in self-funded search, so I'd start there,such as^redacted, ^redacted, ^redacted, and ^redacted
in Houston, TX, USA
What I did before reaching out to anyone was ensure there was at the least a general match between investor's criteria and my deal. I assumed some are not active. At the time I thought it was normal to get the response rate I did.
My initial intro emails are short and sweet including the high level of my deal and intention of my outreach looking to initiate a relationship.
I know some of these guys! I've been lucky enough to talk to a few of them.