Fundraising - oversubscription

by a searcher from Harvard University - Harvard Business School

3 years ago

Hi:
  The fundraising of my deal went quite well. I am starting to think about the oversubscription.  I am wondering how you deal with this. Some investors might change their minds during the capital call. Shall I raise more than the target to offset this scenario? If so, how much more? What if no one cold feet during the capital call?

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3 comments

searcher from Stanford University - Graduate School of Business

Treat your investors how you would want to be treated. To me, this means you continue ongoing conversations with incremental investors, while being upfront about where you are in raising the capital. Being transparent and long-term relationship focused is particularly important as you will face the same issue again as you raise money to fill the equity gap for your acquisition. The most obvious targets for that will be the investors who liked your story but for whom you had no search fund units left. In some cases, they may actually prefer the flexibility to come in at the equity gap stage.

3 years ago | like reply | 5 likes

searcher from Carleton College

You may have to go back to your investors, explain the potential “problem,” and ask if they would still be interested if their deal share is smaller. Or maybe they already have other creative solutions for such circumstances?

3 years ago | like reply | 2 likes

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