Self funded vs traditional: deal size & keeping current job

November 21, 2024

by a searcher from Clarkson University - School of Business in Philadelphia, PA, USA

Hello everyone!

I have been talking to people in the search fund community and there has been a large push to go self funded instead of the traditional rout from everyone i talk to.

I am wondering if there is a major difference in deal size when you are self funded, is it not practical to do as large of a deal and if it is how do you garner the same deal size?

Also is it possible to keep a job where you’re working 40 hours a week and still search on nights and weekends? I will obviously leave post close.

open to discussion with anyone with these or similar insights they have!

thanks!

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Reply by a searcher
from The University of Chicago in Dallas, TX, USA

I said this in another post but applies here as well: As a traditional searcher myself, here are some counter points to what has already been said. Take it for what it's worth. 1. A traditional search is a full time job. You can't be employed doing anything else. Period. 2. You have a great deal of autonomy in traditional. Yes, you have investors, but you do not work for them. They are partners - not bosses. 3. Deals are WAY bigger in traditional. The average deal size is $16M according to 40 years of Stanford data. You will own a smaller percentage of a MUCH bigger pie. I would rather own 25% of a $20M company with no PG, than 100% of a $2M business with a PG. 4. Traditional is much harder to get off the ground and start than self-funded. There is a lot of money out there, but you still have to fundraise, and that process is challenging and time consuming b/c you have to take the time to build relationships.

Reply by a searcher
from Harvard University in Bellevue, WA, USA

Larger deals in a self-funded search are possible but challenging. Brokers for businesses with EBITDA over $3M often expect formal capital sources, and competition from LMM PE can make things tougher. You need to be able to clearly explain a complete financing plan and demonstrate that you have the access to capital and/or investors that will enable you to complete the transaction.

Balancing a full-time job adds complexity—deals move during business hours, and brokers aren’t having those conversations on nights and weekends. Staying competitive while working requires exceptional time management or flexibility in your current job.

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