Crazy Idea? Potential Partnership with Self-funded Searchers

March 15, 2024

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Seattle, WA, USA

I am a passive investor in searchers' climate-related deals and a sponsor/GP in larger climate-related deals. I am curious to explore whether there is a third option--a partnership model---that will help self-funded searchers find, evaluate, and close deals while allowing me to be more active in great companies that I would have passed on based on size alone.

Here is my crazy idea on how this could be mutually beneficial for self-funded searchers and me:

What I can offer
* Access to climate-related deals (I have sourced and qualified sub $2M deals from my climate network, proprietary outreach, and limited-access banked deals as well as widely-distributed broker deals which I have advanced passed owner meetings)
* Support diligencing the deal (this isn't about handing off leads; it is a true partnership)
* Serve as an anchor investor
* Support equity and debt fundraise (I have relationships with banks and family offices from my Amazon's Climate Pledge Fund days and from launching SMB Climate last summer)
* Serve as an active board member (I have 15 years of climate experience both as an investor and operator)

What I seek from a self-funded searcher
* Willing to relocate to most parts of the US (climate is already a large filter so we must be location agnostic)
* Serve as the CEO
* Willing to put a PG on a loan (these deals are perfect for the SBA 7(a) program)
* Active in your self-funded search for 3+ months (you understand the model well and have key assets in place)

TBD on the deal economics, but for sure it will be significantly weighted toward the searcher for obvious reasons. Open to any thoughts from the community.

I am sure there are some major flaws with this approach (please point them out on this thread or via email), but at first glance it has the potential to address some of the challenges of self-funded deals; namely, finding great deals, winning deals given lack of domain experience, and leading a company without a strong support network. It also allows me to find a great home for businesses of which I think highly and are driving meaningful climate impact.

Thoughts? Crazy or worth pursuing redacted

Reply by a searcher
from Naval Postgraduate School in Washington, DC, USA

Your offer is very interesting. Could you please provide examples of the types of businesses you have been involved with and the solutions they offer? Climate change is something I, and probably many, are not familiar with. I’m trying to wrap my brain around the industry from an economic perspective.

Additionally, is it feasible for someone without prior experience to manage these businesses, or is it necessary to hire experienced individuals immediately after acquisition, especially in cases where the previous owner possesses critical expertise?

Reply by a searcher
from University of Pennsylvania in Pittsburgh, PA, USA

As a self-funded searcher, I LOVE it and see almost zero downside, so long as you don't ask for too much of the equity. You should get more than other investors, since you "originated/sourced" the opportunity, but so long as you are fair on that point, I really don't see ANY downside. Maybe just calc a fair/standard "finder's fee" and rather than getting paid that amount, you get it in additional equity? Good luck!

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