Self-Funded Search | When To Start Fundraising

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June 22, 2023

by a searcher from The University of Texas at Austin - Red McCombs School of Business in Dallas, TX, USA

Self-funded searchers - when did you begin equity fundraising?

I think there are a couple of alternatives here:
- Pre-search, organizing a group of people likely to write a check based on credentials
- As soon as a deal is under LOI
- Following an LOI, once an SBA lender is firmly in place

My current thought process is that I will begin shortly after LOI, but before bank financing is fully established such that the two funding sources align on timing and close.

What did you do and what do you think is best practice, or what could have been improved in your personal process?

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Reply by a searcher
from McGill University in Montreal, QC, Canada
We have yet to close our deal, but I've found that it is best to groom equity investors as early as possible Pre-search and get soft commitments so you can model eventual transactions. This will also reassure sellers and/or sell-side advisors. The market is growing more and more weary of Searchers that sign any LOI and then take 2 months to find funding that never materializes. Having your equity investors lined up early will also let you focus on securing debt financing once you have an LOI in place (it is a good idea to network with bankers early on too, just to get your name out there).
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Reply by a searcher
from INSEAD in Connecticut, USA
Echoing pre-search and definitely well before LOI. pre search at a minimum you'd want soft commits from core investors and alignment on your search parameters and their range of investment if it's the right deal from their perspective. Would be very hard post LOI to move fast enough if a competitive deal if you're starting from scratch....
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