Self-Funded Searcher Seeking Hybrid Investment Structure Guidance

Fellow Searchfunders, I'm structuring a self-funded search with flexibility to pursue larger targets ($3-6M EV range) where I'd bring in a single co-investor on select deals. Looking for input on market terms for this hybrid approach. *Deal Parameters:* - Non-SBA financing (conventional bank debt capped at ~50% LTV) - Single co-investor model vs. syndicate (for decision-making flexibility) - Flexible exit horizon based on value creation opportunity (buy-and-build vs. operational improvement vs. strategic exit) - PG requirement likely to be expected from any 5%+ shareholder taking board seat Sample Structure ($4M Total Uses): - Searcher equity: $1M (66% common) - Co-investor equity: $500K (33% common) - Seller note: $500K - Senior debt: $2M Key Questions for the Community: 1. *Equity Structure:* Given my substantial capital contribution###-###-#### % of equity), is straight common equity market for the co-investor, or would they still expect preferred? Has anyone successfully pitched pari passu terms in similar situations? 2. *Step-Up/Promote Economics:* Traditional search investor terms include step-ups tied to return hurdles. With significant searcher capital at risk, is eliminating the step-up entirely reasonable? Or would a compromise structure (e.g., catch-up provision after investor recap) be more palatable? How about an initial return up to 2x MOIC, after which set profit sharing splits are put in place? 3. Governance vs. Economics Trade-off: For a 33% investor writing a $500K check and potentially providing a PG, what's the minimum governance package? Board observer vs. director? Protective provisions scope? 4. Holding Period Alignment: Without traditional fund constraints, how have others structured investor liquidity rights? Considering: - No forced exit timeline - Right of first refusal on investor exit after year X - Tag-along/drag-along provisions - Potential for follow-on capital in roll-up scenario (from searcher as well) *Precedent Structures:* Does anyone have visibility into how groups like SIG or other flexible capital providers structure similar deals? My understanding is they typically use common equity without step-ups/vesting/etc but would love to see what it looks like IRL. *Sensitivity Analysis:* How would market terms shift if equity split moved to: 50/50 searcher/investor 40/60 searcher/investor Happy to take this offline with anyone who's executed similar structures - or interested to invest in this structure. Looking to close my first acquisition in the next 6-18 months.