When is the right time to talk with investors?

 Search Survey Talking with Investors Compilation

39 searchers, operators, and searchers who’ve exited shared their experience in running their search and company. One question I asked was, “When is the right time to start talking with investors?” This is a compilation of those responses. For individual surveys, compilations, and resources, head to the search fund page on this site.

When is the right time to start speaking with investors? How did you select your search and/or acquisition investors?

  • It’s never too early. Every conversation with a high-net-worth individual or PE fund could turn into an investor selection. It’s much easier to find mutual fit and alignment when you are not asking for money.

  • ASAP, but have pre-existing relationships as a self funded searcher.

  • As soon as possible. Select based on what kind of company you will look for. (size, region, industry)

  • As a self-funded searcher, I’ve spoken with a few potential investors to set the groundwork for when I do find a deal but I’m not sure if it is necessary as I’ve yet to go under exclusivity.

  • Started speaking to investors once I got my deal under LOI. Already have a reasonable investor list through my personal network and other professional circles, so raising the equity was always less of a concern for me.

  • As soon as you think you may want to search.

  • As early as possible – know enough about search to be dangerous but don’t have to have any theses lined up. Have lots of questions for them – it’s a two way street.

  • As a self-funded searcher, I began engaging with investors when I started my search, not before it commenced.

  • As early as possible. I wish I would have built relationships sooner and gotten to know more investors before raising. However, remember that you will be judged on even early informational interviews. Other than the obvious that investors need to have capital and a track record either investing in or running lower middle market businesses, I wanted to build a “tribe of mentors.” I selected for more engaged investors that had a mix of experience sourcing, closing deals, and operating companies.

  • After having spoken to 5-10 searchers and being reasonably sure that you want to do it. Accelerator was the path for me given I did not have means to self fund and did not think incentives were great in traditional search model.

  • As soon as you have finished reading the easily available materials about the search fund industry. I selected my investors by identifying core skills and then finding people that fulfilled those skills. We also needed investors that were willing to invest with an indefinite time horizon.

  • Short intro calls where relevant, but primarily after you have an LOI.

  • For a self-funded search, the right time is shortly after starting the search.

  • Right after starting, I began to have general conversations about what I’m doing with potential investors. The reality is it could take me a while to find a company and a commitment to invest today doesn’t guarantee anything down the road.

  • ASAP: early to verify value proposition, then advise, then raising funding commitment.

  • 1-2 months before you’re ready to launch. Fundraising happened super fast. We wanted to have our legal fund formation and bank accounts set before accepting any commitments. We sourced largely through Stanford GSB network – professors who invest and classmates who had searched made introductions to their networks.

  • I’m still trying to figure this out. I think early is better. What I’ve found is that there are a lot of investors who are interested…once you have a deal (which is completely understandable).

  • As soon as you are considering a search. Get their opinions early. For me it gave me the confidence to self fund for a year knowing funding would be there if I wanted to go the other route. I selected for breadth of background (some funds, some former searchers, some longtime individual investors). I capped the max investment at 10% of my fund so I could put as many different backgrounds and personalities on my cap table. I also told them I would hold the investment a minimum of 10 years, and if they wanted me to sell before that then they shouldn’t invest. I ended up with 16 investors including myself.

  • During your search.

  • Early as possible. We talk to everyone.

  • Actively seeking investors for diligence and acquisition phases.

  • Early and often as they say. Since the independent model is slightly different from search funds, I like to engage with a pool of family offices early on to obtain ‘soft circle’ investments then go out and initiate my targeting to find and acquire my portfolio companies.

  • Once you are able to have a informed conversation (ie. have your thesis thought out, plan for next steps, etc.) Never to late or early to start talking to the funding partners.

  • I think momentum is important with the fundraising process. You can start having casual conversations with investors early on and figuring out the landscape, but once you start fundraising it should be a dash.

  • Right time is after you have many discussions with your potential partner about how the relationship will work and if you are both all in.

  • Still finding out. We are talking to some of our earliest institutional investors right now. For individual investors we have been getting in front of them when convenient. Our timeline is long since neither of us will leave our jobs until April. We are in stealth mode, but getting a lot done in the lead up.

  • As soon as possible – at least 6 months prior to starting the search process. I chose investors that I believe would fit the standard search fund investor criteria – investors willing to be active and with more than just money invested (wanting to mentor, etc.) – but also overweighted for local investors given my search focus. Additionally, I tried to balance the profile of investors by experience/expertise (directors, investors, operators and entrepreneurs) and age, to ensure I had a wide range of support sources for the different stages of search fund investing.

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