The Big Question
What Do Search Fund Investors Look For?
One Question, Three Answers
Ask the question the way most first-time raisers do and you get a list of firms rather than an answer. The answer starts with which lane of capital you are asking. A traditional backer funds the two-year search itself. A gap investor writes an equity check into one specific deal at the letter of intent. A residence program pays you a salary and keeps most of the equity. Each is buying something different, so each reads you differently, and the fastest way to look unprepared is to bring one lane’s materials to another lane’s meeting. If the model itself is still new to you, start with what a search fund is; if you already know your lane, the shelf of firms is organized by exactly this split.
What Each Lane Weighs
The traditional lane funds the search itself, so the firm is underwriting you long before there is a deal to price. What it weighs: Whether you will finish a two-year search, not only start one. The quality of your thesis and target criteria. How you will behave on a cap table over a long hold. The lane runs on conviction about a person, which is why the first conversation is about your background and your thesis rather than any listing.
The self-funded lane’s gap investors usually meet you for the first time with a deal already under letter of intent, so the read is faster and colder. What they weigh: The deal itself: is the business financeable and fairly priced. Your underwrite, since there is no search track record to lean on. How much of the equity gap actually remains after the loan and your own cash. There is no two-year relationship to fall back on, which is why the underwrite carries the whole meeting.
The employed lane is a hiring process wearing a fundraise’s clothes. What a program weighs: Whether you can operate, since the firm is hiring a CEO. Fit with the firm's playbook and the cadence its portfolio runs at. Why you would trade ownership for a salary and a built-in backer. The programs recruit on cycles like any employer, and the job board carries the ones open now with their terms.
The Terms Firms Actually Publish
Most firms publish no term sheet to prepare against, which is itself worth knowing before the first call. On the site’s shelf of 29 firms, 10publish concrete terms: a check size, a stake, a fee. Where they do, the numbers are specific. Relay Investments, a lead investor in most of the searches it joins, publishes: “Typically 15 to 25% of the cap table and $1M to $3.5M at the acquisition, with searcher upside of 25 to 30% over holds of 6 to 10 years.” In the employed lane, NextGen Growth Partners publishes: “Up to 25% of the equity by vesting, plus the option to put up to 10% into your own search.” The rest tell you on the first call, which is why the shelf marks which firms have published terms and which have not. One fact holds across every firm on it: each one writes equity into a specific deal, so a live deal is never the wrong thing to bring.
The Artifacts That Answer Each Ask
Every lane’s asks map to a document you can build before anyone asks for it. The sourcing thesis, industries, criteria, and how you will source, is the Search Thesis Builder’s output, and walking in with one is the clearest signal you understand the traditional lane’s first meeting. The one-page operator case, who you are and why a board should trust you with a company, is the Buyer Profile Builder. For a live deal, the underwrite is the conversation: run Underwrite a Deal end to end, then put the equity ask in context with the Sources & Uses Builder, because a gap investor’s first question is how much gap actually remains after the loan and your own cash.
Before the First Call
Sequence the outreach like the raise it is. Know which firms serve your lane and what each has published before you write to any of them; the shelf filters by exactly that, and each firm’s card links the full review. Bring your lane’s artifact finished rather than promised. And give the work the runway it needs: investor preparation is sequenced into the 90-day syllabus alongside everything else, so it lands in weeks rather than piling up ahead of a deadline. The firms will tell you the rest in their own words, which is the point of asking each lane for exactly what it is listening for.