Self-Funded Search Economics on Larger Deal

by a searcher from Queen's University

3 weeks ago

Hi all-

I'm in the early stages of thinking through different deal structures. Does anyone have a sense for the economics of a self-funded search on a larger deal ($10m+ EV)? If the searcher is contributing 5-10% of the deal (call it ~25% of the equity investment) and investors contributing the rest of the equity, does the typical 1.5-2x step-up still apply here or is that more for smaller deal sizes?

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searcher from Harvard University

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3 weeks ago | like reply | 0 likes

searcher from INSEAD

I would go with the combined answers of ^Searchfunder member‌ and ^Searchfunder member‌. If self-funded, step up is irrelevant (there is no search capital so investors should not require additional incentive/remuneration to compensate for the risk of not finding a deal, earlier investment, etc. which is what the step up is for). Typical self-funded deal is that searcher gets >50% of common, with investors contributing all equity into preferred instruments - if you are contributing a largish amount of the capital###-###-#### % of the capital qualifies in my view) then you could either negotiate a higher amount of common or lower hurdles on the preferred.

3 weeks ago | like reply | 0 likes

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