I have spent the past 5+ years in IB / PE, with the last 3 at a MM PE shop.
One part of the job that I have enjoyed more than I expected was deal sourcing. I have had some luck there early on (sourced multiple deals for the fund to date).
Am I crazy to think that I would have some success as a solo searcher offering the following two services to PE, VC and strategic / corporate buyers?:
SaaS Platform: I would continue to call on bankers, research companies and contact founders and log notes, revenue figures, etc. and sell access to a database (I know there are services out there that - try to - do this)
SaaS Platform + Pipeline Management: Access to the SaaS platform plus I would create tailored email templates for clients and reach out on their behalf to prospective targets, track progress, liaise with the sellers.
1 monetized through a monthly SaaS fee. #2 charge retainer to conduct outreach to desired universe of targets and a success fee (say 1% of transaction value if it closes). A lot of the buyside firms I have worked with seem kind of antiquated (still mailing flyers versus cold email / digital marketing).
The upside in my mind is requesting co-invest alongside these buyers for deals that I find for them. The other opportunity I see is automating #1 and #2 and spending a good bit of time interviewing founders, bankers, etc. as a way to create content and drive traffic to the site.
Should I take the leap? Any thoughts welcome.
Wanna solo search for distressed industrial businesses? Hot market these days.
sourcescrub is a company that does a lot of what you’re mentioning I believe. you may be interested in joining there team.
Thank you for the comment. I had a more detailed response on this below, but SourceScrub is really just a PitchBook alternative (at least my experience with it).
I am talking about creating a database of high quality leads / processes / companies looking to sell versus just business profiles. Hope that is clear and thank you for commenting.
As mentioned above, Sourcescrub is exactly what you're describing. Founder is an ex-Serent guy who had built out a bunch of the sourcing framework there. I believe they were building an internal sourcing database and he decided to go out on his own with the platform and sell it as a SaaS offering.
If you're looking to build a platform and sell it as a platform, I think you'd have to have some form of differentiation as Datafox, Sourcescrub, Pitchbook, etc already do a fair amount of that data scraping.
If you're just looking to be a consultant and to help find deals for businesses, there's a handful of people that do that. My gut feeling is that if you carve out a niche in a certain industry, have a proven track record, and focus on smaller firms that are willing to essentially pay a referral bonus for any deal you bring to them, then it's a viable business model. It's a grind though. There a firm called Razorhorse that is essentially 3rd party sourcing for PE firms and they take a cut of any deals that get done. From what I hear, the business is doing ok, but it's a grind and the business is lumpy.
Personally, I think you'd be better off just joining a fund as the head of Biz Dev and building out that team.
Thanks for reading through and commenting. Much appreciated.
I've used SourceScrub for the past year and it's really no different than PitchBook. I probably didn't write it clearly, but I am not looking to create a database and simply profile companies. Totally agree, creating profiles would be just duplicating the many services that are out there - Datafox, Sourcescrub and Pitchbook.
The SaaS offering I am describing would be access to a database of deals / active processes versus company names. There is a big difference. If I come across a company name or upcoming conference, SourceScrub and Pitchbook are helpful. If I want to know what deals are in market, I have to rely on internal calling efforts with banking relationships.
There are a few services out there that do this: Interexo, DealStream, even "BizBuySell". The quality of deal is low.
As a buyer, a list of 100 companies from SourceScrub isn't helpful. A list of 100 companies that I know are in market / thinking about selling is extremely helpful. I would be looking to establish the latter. Hope that distinction is clear and interested in your thoughts.
Also, agree the consulting (effectively, buyside advisory) would be very lumpy. A would view it as upside if the SaaS offering got some momentum. I haven't heard of Razorhorse but have worked closely with a few others out there.
Without going into a huge tome of a message, I think you're going to find this quite challenging. What I believe you're describing is essentially what Axial does (https://www.axial.net/). They have been around for a long time and have a pretty robust set of opportunities.
I think one of the problems you are going to encounter is that PE firms are happy to pay fees on proprietary deal flow. The very nature of a database / subscription approach means that you are competing against everyone else who is a member of the service. From the PE perspective, this is not nearly as appealing as someone doing dedicated outreach on behalf of the PE firm and taking a cut of the deal. There are a lot of firms as well as one off individuals that do precisely this (essentially buyside searches). The space is more competitive than you might think. Also -- when you say that you "sourced" a bunch of deals -- was this calling companies direct or calling investment banks to include you in their sell-side processes? If it is the former, great! If it is the latter, PE firms are not going to pay you for this.
I've used multiple different investment banks and "one off guys" to do buyside searches where they are essentially researching and directly calling on a universe of prospective acquisition targets. It is an absolute grind. We'll go through lists of hundreds of names and MAYBE 2-3 will result in a meeting. There are so many that (a) don't meet size criteria, (b) don't want to sell, (c) turn out to already be professionally owned, and (d) the list goes on and on. As sourcing was one of your responsibilities in PE, you probably have a good appreciation of this.
In summary ... this is hard, and it is being done by a lot of very sophisticated and well bankrolled organizations. My recommendation would be to put a few more years in as a PE investment professional before going down this path. You're right on the cusp of earning carry and you should get a good appreciation of the opportunity cost of leaving your current progression path.
I think someone could do very well if they handle the digital side well. People are always surprised to hear we do things like geofence conferences targets are likely to attend and bombard them with relevant ads (high freq via programmatic ideally) for deal flow lol.
A perhaps less risky alternative (if taboo on this forum) would be to switch to IB in a sponsors coverage group. I feel like the only problem with a stand-alone online platform is people wouldn’t pay enough for an untried platform to make it sustainable, and if you priced it low, how would you force companies/sponsors to pay you a commission? As shitty as it is they could just say a bank connected them with the opportunity. It’d be tough building enough of a track record to command the price your service deserves. Either way though, you have a very valuable skill set. Being an excel wizard has never made anyone’s career in banking or PE. Being able to get in front of companies and drive transactions on the other hand is a rare asset. Best of luck.
I don’t know the MMPE space that well, do grain of salt here for sure, but one problem I see is degrees of trust. for you to differentiate from profiling services like pitchbook, the quality of your leads would have to be incredibly high. Getting started would be really difficult, because you have to build trust in two directions, from you to companies, and from you to PE shops.
might be more worth to stay in your role, and do this on the side. build the trust and the connections, and then once you reach a critical mass build the software to monetize
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