What is a typical sponsor promote for self-funded search?

February 11, 2021

by a searcher in Charlottesville, VA, USA

I've seen a few data points in the GSB primer, but curious what people are actually able to get. Also, what IRR and/or MOIC milestones is the promote typically tied to. I know that there is no "one fits all" solution, but curious to hear some real data points from searchers/deals that got funded.

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Reply by a searcher
from Brigham Young University in San Antonio, TX, USA

I have had the same question but have not seen any kind of standard or formula. There are some insight about it here https://jimsteinsharpe.com/contemplating/funding-the-search/#:~:text=Investors%20receive%20a%2050%25%20step,25%2D35%25%20upon%20exit. but as you said there are no specifics. Please post if you find any examples and the reasoning behind the calculations.

Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA

I have recently seen numbers in the 20-80% range with and without hurdles. It is the Wild West and there is no “market”. Typically, the smaller the equity check, the higher the promote. Most successfully closed deals I have seen required $0.5-1.5M in equity of which the searcher and related parties contributed a large percentage. Deals requiring larger equity checks tend to have similar terms as traditional search deals (~25% with tiers).

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