How to raise capital for your first acquisition?

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August 02, 2024

by a searcher from Baruch College-The City University of New York - The Zicklin School of Business in New York, NY, USA

If you're interested in pursuing the search fund route but don't have the capital, what are some of the better ways of going about finding investors for committed capital in order to make your first acquisition?

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Reply by a searcher
from Michigan State University in Kalamazoo, MI, USA
If you read the 2023 Self-Funded Search Study (linked below) an interesting pattern emerges. The most common path of a self funded searcher is to begin searching for a business generating between 750k and 1.5m. However, of those that successfully acquire a business MOST actually end up buying smaller somewhere around 400k SDE on average. (I fit this mold, I ended up acquiring with just my personal cash, seller note, and SBA loan) The reason I point this out is you can waste a lot of time lining up capital that you never end up needing. Finding a "investable deal" is probably 10x harder than finding the capital, so I would really recommend focusing there.https://drive.google.com/file/d/1Aq1XHtCNtVD0_Jkx8CAYyDF20YpPCERh/view
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Reply by a searcher
from Texas Tech University in Austin, TX, USA
I have not seriously looked into raising capital at this point. However, if you very new to this process, I would suggest start with attending a couple of Search Fund related conferences in some of these universities. They do bring in a number of investors that will help kick start your investor network. You may also have to decide soon whether you want to do Traditional Search of Self-funded search. That will make a huge difference in when you are going to get the capital (before or after LOI) and other terms that follow etc.
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