What is the average investor check size for a self-funded deal?

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August 30, 2021

by a searcher from University of Pennsylvania - The Wharton School in New York, NY, USA

I'm wondering what size checks outside investors typically write into self-funded search deals.

For context, I'm looking to do a small self-funded deal ($1-3m total acquisition price). I'm guessing my check sizes might be a little smaller than average, but I'd like a more specific idea. I know check sizes can be a wide range but any sort of "median" or typical range would be helpful.

Thank you!

John

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commentor profile
Reply by a searcher
in New York, NY, USA
John, the answer is going to be one of the ugliest two-word phrases I know: "it depends". Generally you won't want a check size below 25k for operational/simplicity reasons. For a 3mm acquisition, I'll assume you're getting at least 2.5mm in SBA debt, that leaves you with a 500k equity check to write. Again, from an operational/logistics perspective you won't want your investor base to be too large or disparate, so I'd say your median check size will probably be in the 50k-100k range. But the reason I say it depends is because you may find a cornerstone investor willing to underwrite the whole deal or do 75% of the equity. Or you may find that it's a difficult sell and you'll have to eat the logistical hurdles of managing a team of 25 investors and have smaller checks spread across more investors. At your deal size, the second situation is unlikely but possible. The cap table will be dependent on the deal you're trying to structure, so perhaps the better question isn't "what's customary in the market" and instead is "what's best for the deal I'm trying to execute".
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Reply by a searcher
from University of Virginia in Charlottesville, VA, USA
I'm looking to acquire within the same size range $500K-1,5MM SDE/EBITDA and will look at deals sub-$500K so this is a well timed question! What I've come across is the same line "It depends on the deal." But I've begun thinking differently about it and it comes down to 1. how many people do I want around the table actively invested in making the acquisition work? 2. how much economics do I want to give up? 3. the strength of the investor relationships that I have. I'm almost convinced that check size is an output of a number of inputs....
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