Fundraising for Self Funded Search / ETA
3rd Year Senior Associate who is contemplating leaving to start something entrepreneurial / acquire a business. Wondering if anyone has experience / anecdotes regarding ability to raise capital to go alongside my own. Depending on path would look to raise $500k-$2M.
How valuable would it be to have the VP title vs. senior associate?
Based on the most helpful WSO content, here’s what you need to know:
Fundraising for a Self-Funded Search: Raising $500k-$2M for a self-funded search is achievable but requires a strong network and a compelling pitch. Investors in this space (often high-net-worth individuals, family offices, or small PE funds) will look for:
Networking is critical here. Warm introductions through your professional network, LinkedIn outreach, and attending relevant conferences can help you connect with potential investors. Highlighting your track record in deal execution or operational improvements will also strengthen your case.
VP Title vs. Senior Associate: The VP title can add credibility when raising capital, as it signals a higher level of responsibility and experience. However, the title alone won’t make or break your ability to fundraise. What matters more is:
If you’re currently a Senior Associate, consider whether staying longer to earn the VP title will significantly enhance your skills or network. If not, it may be better to focus on building your entrepreneurial narrative and starting your search sooner.
Key Tips for Fundraising:
Ultimately, while the VP title can help, your ability to raise capital will depend more on your track record, network, and the strength of your pitch. If you’re confident in these areas, you can succeed without waiting for a title upgrade.
Sources: VC startup idea - PE or VC interest? Are these numbers viable?, Q&A: VP in Private Equity (Growth Equity + LBO)...Post-MBA...Formerly IB Analyst, No VP Promote from Sr. Associate - Seeking Advice, "We don't hire VPs", New VP struggles - asking seasoned VPs for help
Irrelevant on title - running a business has little in common with high finance role progression. I’d also caution you that for something that small you’re buying a job.
In terms of raising capital, if you have a good deal you will be able to find the money.
What is your view on the minimum size / sweet spot? >$1M in EBITDA?
Sweet spot for what? For it being able to support a CEO so you aren’t in the weeds? For it to be large enough for bigger pools of capital?
Not trying to be pedantic, it’s just such a wide spectrum, and also ties to your network for capital, lived experiences, and honestly what you enjoy.
You’re always infinitely better off buying a business you are passionate about, as well as have some experience in. Will make selling to investors easier, and you’re more likely to succeed
Agreed with above.
I know plenty of former PE Associates that successfully raised search capital with that title.
I ran a conference on eta just a month ago, there are idiots lining up to give undergrads capital. If you have any sort of experience you’ll find someone else’s dime to do it on.
Is it generally coming in the form of traditional search funds? What kind of returns are these guys underwriting?
The one thing I can't square is that I've heard it usually takes ~2 years to find a deal but that there's a massive wave of boomer businesses without transition plans. Any insight into supply v demand dynamics?
Any materials available coming out of the conference that you might be able to share / direct me to?
Supply is much much greater than demands. And the echo chamber of wso does a good job underplaying it. And returns are quite great. Most of these places I’ve seen can have up to like 25% opex and personal expenses with a terrible marketing strategy. And don’t go through a broker. You’ll get a much better deal without it. Every broker you meet is one slimy and doesn’t have your best interest at heart
Ok I’ll give you the rundown. It’s really incredibly simple it’s not easy but it simple. Capital is coming from anywhere traditional vs out of the box.
I think the biggest thing is geography. There’s a huge over saturation of not very serious and quite frankly arrogant and unprofessional mba students who come off to sellers as entitled in the areas near big cities like Boston, Chicago suburbs etc. But let me tell you if you want to live 30 minutes south of Nashville and would commute another 40 everyday to the middle of no where Tennessee you will find a ridiculous amount of companies that have never been contacted, stable growing cash flows for the last 50 years and recession proof. The problem is no m7 mba is gonna wanna live there. And that’s just a specific example but like suburbs of Detroit, Oklahoma City, Columbus Ohio, that’s where this strategy is gold. Also too most callers take no for an answer on the first call. Don’t ask to buy but pitch them with all your effort. Searching is not hard if you look in the right places
I am less bullish. The acquisition rates for the most recent t-minus 2-year searchers (from traditional paths) are pretty poor. Under 15% of groups and individuals acquired I think. This is the 2023/2024 start date cohort. Those who did acquire a) found opportunities that fit their unique characteristics as a person (ex. a woman buying a pelvic floor therapy clinic) b) were truly outstanding searchers/operators, c) acquired, but are underwater/in a basket case deal, d) managed to find a unicorn via an intermediary.
The guys and gals that have had tremendous success typically have an 'edge' as to why the seller should work with them, besides simple personality fit/grit/firm-handshake BS. Previous operating industry exp is a huge help and differentiator...but not necessary - see Zhang/Sloan in both of their deals or Cold Storage Warehouse.
Why this is happening is a broader question being asked across the ecosystem. Lots of factors are at play. AI is cheapening personalized outreach, sellers are more attuned to what their valuation truly is, sophisticated competition in the LMM from platforms, etc. I think one of the biggest misconceptions is the idea that the vast majority of these boomer businesses are even worth buying. Of course, there are plenty, but the idea that every old guy with a mid-size business is a viable/investible target is false. Reigns point on geography is accurate...there are tons of searchers only looking in Tier1 markets at their own peril. However, like all things, business are where people are. Density drives where opportunities are in a broad sense.
Also worth noting - there is a strong element of groupthink among the ETA investors. In general, they are hesitant to go too far off the beaten track/without other 'legacy' investors participating. If you were to bring them a great, growing widget manufacturer that runs a PO-based business model, for instance, you would have to have truly elite revenue quality/rev retention to get people excited. Tech-enabled services of all stripes are what they like. Always funny when they say 'we invest in growing, recurring revenue/contracted revenue, sticky businesses'...like yeah, who doesn't? If you go self-funded, you will have much more flexibility, but you still will have an IC-like gauntlet to survive. If I were to do it again, I would go this route.
Finally, let's say you do acquire via a traditional ETA model. It's not out of the question for search CEOs to get canned/pushed out by the board. This has happened a number of times in the past 18mo. Most people do not get to take their common with them...but in many of these cases, the equity you have aint worth too much lol
Again, these takes are all from a jaded/but relatively successful former searcher who got into a deal via ETA, but in a weird, backwards way. Not the traditional sense like I first imagined, but it all worked out in the end. I don't like the idea of people diving in blind and thinking it'll be a snap. Searching is far more emotionally challenging than I expected. Dealing with uncertainty and your peers/broader network being aware of your obvious professional failure (if you dont acquire) is hard to contend with, esp if you've had a successful early-career/b-school exp.
Yea I mean that’s all true, there’s pros and cons but I mean if a good deal is a good deal. I haven’t actually gone through the process so I wouldn’t know. Definitely not a realm I would get into without relevant experience. Such as pe portco or LMM pe. Which is where I want to go. Hope to actually build out a platform to rollup one day
"I haven’t actually gone through the process so I wouldn’t know."
No kidding. Why would you say foolish things like "Searching is not hard if you look in the right places" when you haven't even done it? This is classic WSO Dunning-Kruger
Those stats on success rates are dark…
Stark difference from how this path was being advertised just 5 years ago
Where are you getting your 15% figure? I've heard rates are down to about 50% for traditional search funds - if it was 15% I'd be shocked.
Here's an overview of what I'm seeing across the market. I'm at CapitalPad, where we invest in self-funded search and independent sponsor deals.
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