A short afternoon thread on how the source of funds for different types of search fund investors impacts the investments they make in the #smb world:
Private Equity: large sums of money coming from LPs; where they invest depends on their mandates, but they have capacity to invest in multiple deals each year. Return requirements mean most PE funds are not going to invest in the smallest SMB deals (typically focused $3M+ EBITDA);
Individual Investors (angels): varying sums of money coming from their own personal assets, broad flexibility to invest in companies and owner/operators they find most interesting (since the money is all theirs); more likely to do fewer deals per year. I've also met several individual investors or small funds that like to co-invest in deals brought through search fund accelerators (more on them below) or prominent MBA programs as a way to get consistent high quality deal flow;
Family Offices: similar to private equity, but LPs are typically one wealthy family (or a group of wealthy families). They sit in the middle - typically more funds to invest than angels, more flexibility to make mission-driven investments than PE;
Search Fund Accelerators: a smaller population, running a PE-style investment strategy but with a small business mandate, meaning focus on #smbs and less opportunity cost when it comes to investing outside our space. Focused on small numbers of talented entrepreneurs;
Hope this was helpful - have a great night!