Use VC investments for Independent Sponsor deals?

July 25, 2025

by a searcher from University of Chicago in San Francisco, CA, USA

Are VC investments a positive or negative signal for IS or search fund investors? We are getting interest from VC to invest in our AI rollup strategy. However, I'm unsure whether accepting their funding would help us with independent sponsor deal fundraising (from family offices and IS backers like ) or hinder it, as VC has quite a different investor and risk profile. Has anyone done this before? Have you seen folks using two entities for raising from VC (who focus on team and tech) and raising from traditional investors/LPs (who focus on deals)? Any sharing of experience or advice would be appreciated!

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Reply by a searcher
from University of Toronto in Toronto, ON, Canada

I'm building a more traditional startup, so I'm not exactly in the same situation as you but I'll mention my experience just in case it helps you think about this. We considered getting funding from both VCs and other types of investors that were interested but we decided to focus on and get all our funding from VCs for a few reasons. Here are some of the main ones: 1. It was easy enough to sell a good VC on our vision and our team. It's easier to deal with an investor who invested in you because they are fully bought in into your vision and the magic of your team. 2. We were early, and there are plenty of VCs that are willing to invest in very early teams/companies 3. A good VC will understand if we need to make a "wild" decision that results in the company becoming far larger in the long term. For example, if we want to make a pivot that will require us to build something new for a while instead of growing the current product's userbase, a good VC is more likely to understand that and not annoy you about it Your situation is a little different so some of these points (like #3) may not apply to you as much. But consider if you even need investors based on your strategy. It might be worth your time and energy to build AI products that are profitable form day 1 instead of raising capital. I know someone with a holding company for AI-powered SaaS tools, and they didn't raise a single dollar. They made one product, sold to private equity, then made more and sold those, and now they have enough money that they are building a whole portfolio of AI agent SaaS tools without funding.

Reply by a searcher
from ESCP Europe in Berlin, Deutschland

i think a lot of VC out there have to much dry powder left in some of their vintages, so they search for deployment options in other asset classes. Roll-ups or roll-outs are one of them, cause of their potential revenue profile. There are also new vintages out there spezialising in roll-ups, but from my point of view this is against their original mandate. Goof for roll ups cases - bad for LPs.

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