Investor terms for self funded search

October 15, 2024

by a searcher in München, Deutschland

Dear fellow searchers
Looking for advice / thoughts on investor terms for self funded search (in Continental Europe but highly interested in universal views).
Specifically:

(I) looking to implement an investor class of family & friends - any experience with this, in particular economics and usual terms?
(II) looking to add professional investors on top of the above if deal dictates additional equity need. What are usual terms to fill an equity gap (will likely be small ticket of up to €1m) and will investors be OK to invest alongside family & friends? Also, any hints or names of investors that are interested in these opportunities would be extremely helpful.
Any help is much appreciated - good luck searching everyone!

Reply by a searcher
from Copenhagen Business School in New York, NY, USA

Hi! I'm also in the early stage, we haven't identified a target yet but starting to get a view on terms from investors in Europe.

Overall my impression is that if you can get to a place where there's a high probability of IRR 30%+ / MOIC 3x+ (like without aggressive growth assumptions), then there is a lot of interest. How that will look like depends on different factors, and then you can back in to your terms (like 1.5x to 2x step-up or similar) to "get there" on the returns. Overall you want to create a "win win" where incentives are aligned and you and your investors are motivated by a good outcome.

Happy to bounce ideas & feedback if you want in this process.

Reply by an investor
from McGill University in San Diego, CA, USA

I don't know the terms investors can expect in Europe, but in the US, Sam Rosati has done great work laying out how to model a self funded search and typical terms.
https://www.youtube.com/watch?v=y7qRva9ID6s
https://acquiringminds.co/webinars/how-to-model-a-self-funded-sba-acquisition

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