Proprietary search needed?

searcher profile

August 02, 2023

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

Are traditional search fund investors okay investing if you source your businesses from marketplaces or through brokers. Their fee is not an issue? Does it need to be proprietary?

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commentor profile
Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA
It is not necessarily needed, but any brokered deal will attract 100+ players with committed capital. This usually means that you will lose high qualify deals because you can't compete with the search fund model. If you do get it under LOI despite the PE competition, it is likely that you are either overpaying or you missed something and your investors will not close. This is why proprietary search is likely a better use of your time for funded search.
commentor profile
Reply by a searcher
from Roosevelt University in Boston, MA, USA
Depends on your target acquisition size but nobody really cares where you got the deal. High competition, duplication of deals, different metrics (what does one marketplace actually consider cash flow vs the other) are all issues. That being said that can actually play in your favor in some cases. Marketplaces can also have some really sweet deals if you know how to build the team to address some of the problems in those businesses.
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