Pros and Cons of Raising a Larger Search Fund / Budget

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by a searcher from Lousiana State University
in Houston, TX, USA

4yrs ago

Pros and Cons of Raising a Larger Search Fund / Budget

Hi,

What are the pros and cons of a larger search fund budget?

From the Searcher's perspective, it seems like you are paying a high price for search capital, so there are incentives to raise as little capital as possible, but then again, you have a 33% chance of failing, so if it doesn't work out you miss out on the higher salary you could've raised. The Standford study had the median searcher salary at $110k, but that data is fromredactedI've heard most recent searchers are taking salaries b/w $130-$140k.

How have traditional searchers approached this trade-off?

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reply by a searcher 4yrs ago
from Tufts University in Jersey City, NJ, USA

Trying to raise too much or too little capital to execute your business plan is setting yourself up for a poor relationship with your investors, and the headache of disgruntled investors will make your chances of failure skyrocket. Your investors aren't going to sign off on a searcher salary that they don't feel that you can justify. If you want to make more money, focus on building an excellent business plan on which you can pitch your personal value (and therefore justify more personal comp). Also keep in mind that investors are going to see red flags if you're trying to max out your personal comp right out of the gate. They want to see that you're committed to the end game and delivering equity ROI for everyone in ownership (including yourself), not subsidizing your lifestyle with dollars they're looking to deploy into an investment.

Looking at "percentage of failure" statistics in a vacuum fails to appreciate that there's a spectrum of skill and preparation among searchers. "Your experience may vary" applies heavily here. Your personal chance of failure may be much higher or lower than the larger pool depending on how good your plan is and how dedicated you are to executing it. Investors know this too. A searcher trying to hedge their own bets with an above-market salary will be concerning. A good middle ground to consider would be starting at a more conservative salary, but tying risers in personal comp to milestones that your investors will appreciate.

reply by a searcher 4yrs ago
in Plainfield, IL, USA

Please consult your board before putting too little or too much capital into funding a deal!