Search capital

Definition

Money that pays a searcher to look, before there is any business to buy.

Why It Matters

It is the rarest kind of money in this market and the reason the traditional path exists at all: almost every other lane asks the searcher to fund their own salary and expenses for two years. It is priced accordingly, usually converting into equity at a step-up when a deal closes, so it is the most expensive capital in the structure and the only kind that buys time. And the question investors ask first: it is equity in the search vehicle and not a loan, so a search ending without a purchase is written down by the people who funded it and the searcher repays nothing. The step-up is what pays for carrying that risk.

In numbers: A $500,000 search fund covers roughly two years of a modest salary, travel, and deal costs, and typically converts at a step-up into the acquisition equity when a deal closes.