Holdco startup question

November 18, 2025

by a searcher from Georgetown University - The McDonough School of Business in Washington, DC, USA

How do holdcos start out if they don't raise a fund first? Let's say they're buying at ebitda 1-5M (see a lot of holdcos targeting this) and they hire a GM. Then they look for more acquisitions. But how do they get investors for the first deal/company (without using SBA)? Don't all investors want the sponsor to be the GM/full time? And I thought independent sponsor was generally much bigger companies + economics on that would be small, right?

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Reply by an intermediary
from University of Washington in Chicago, IL, USA

This is how we started our holdco. Been doing it since 2008 before the term even existed. 1. Built up our first business in###-###-#### Got an unsolicited request to acquire the business, and we sold it in 2009 to Slashdot Media. Got a deep unerstanding of acquisitions and how that all worked 2. Rolled the funds into smaller acquisitions that we could grow with our own team 3. Sold a few of those. Kept rolling the funds into smaller and mid-size deals. Kept doing that for over a decade by acquiring, and then selling. These were small exits. 4. Used our main LLC to open a line of credit. Use those funds to acquire more. 5. Used our main LLC again to open a larger SBA-backed LoC. Used that as downpayment to do our largest acquisition in Aug###-###-#### % down, 70% seller financed) 6. Now we acquire larger businesses that we don't plan to sell. The buy-grow-sell model worked well to build credibility, and cash reserves but it's not long-term. In short, we never raised money. We used our competence to build a business, gain the skillsets, and then stuck in that industry for over 17 years now. We don't plan to raise money. I like full ownership. Yes, that means we do smaller deals but my skillset is taking something from 10 to 100, no startup (0 to 10), no entrepreise 100 and beyond (if that makes sense)

Reply by a searcher
from Johns Hopkins University in Gaithersburg, MD, USA

First, accept that you are outside of the "playbook" model. All models are find one deal, close it, operate, wait, and then do another... years. I committed to go big, go bold, go fast... the system does not like that. So get comfortable with a certain amount of chaos. Then build relationships and credibility. I've built a list of prospective investors, individuals, and small firms... with help. Then, when I had my first deal, I pitched all I could... deal, HoldCo equity offer... a one-time offer. I found one who believed... yes, after several very personal and hard conversations. #0, deals this size are hard and uncomfortable to most investors... size matters. But if you can manage it, there is an opportunity. #1, they have to believe in you... Relationships are key, so keep them informed, the good and bad, be 100% honest and transparent IMO. #2, they have to understand and believe in the industry. #3, no deal is done until it closes! My first deal fell through... which hurt but turned out to be a good thing in the end. #4, regular emails to all who showed interest and passed on the deal... wins, failures, lessons, execution. Find your north star and go! Until you have solid success and a larger team... chaos and uncertainty are your companions... make friends.

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