Acquiring Minds Self-Funded Search vs. Traditional Search Funds
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Apr 18, 2022 Robert Graham, an acquisition entrepreneur at SIG, and Greg Geronemus, an investor at Footbridge Partners who successfully utilized a traditional search fund, engage in a spirited debate about self-funded versus traditional search funds. They discuss the economic differences and fixed terms of traditional funds. The conversation dives into governance dynamics, success probabilities, and the flexibility of self-funded searches. Both guests share insights on board assembly challenges and the evolving accessibility of these funding models for aspiring entrepreneurs.
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Traditional Search Fund Basics
- Traditional search funds provide upfront capital and investor support for longer searches and larger deals.
- This model often brings credibility and resources that can reduce risk during search and growth phases.
Self-Funded Search Advantages
- Self-funded searchers cover their own search costs and enjoy ownership flexibility.
- They often retain majority ownership and can target a range of business sizes including substantial EBITDA companies.
Tradeoff: Deal Size vs Ownership
- Traditional search deals tend to be larger but result in smaller ownership percentages for the searcher.
- Self-funded deals typically involve smaller businesses but with higher ownership stakes for the entrepreneur.