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 where to start, and a firm’s own review says which lanes its published model serves.

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. It also outlasts the raise, because the same firms sit on the board after the close, and the first of them a searcher meets is usually a board observer, who reads the papers and speaks without carrying a director’s duties.

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. What they are writing is an equity co-investment, a minority check into your deal rather than a fund of their own, so the terms are negotiated deal by deal and the last one they did is the best guide to the next.

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.

One gate cuts across all three lanes, and most people reading this are on the wrong side of it: whether a firm will back somebody running a company for the first time. 9 of 79 say in their own words that they will. 6 state a bar to clear instead, usually having owned a profit and loss. The remaining 64 do not say, and every one of those was read on its own pages to establish that, so the silence is the market’s and not a gap in this review. Some of them publish something that reads like a gate and is not one: a demand for a track record of achievement, a description of the typical searcher’s prior field, a disclaimer that background matters at all. It belongs in the first conversation rather than in your shortlist, and the lane mostly predicts the answer.

The narrower question is what a firm wants you to have before it will take the call at all, and the answers do not converge: 45 of 79 answer it, in 11 different kinds of answer. Some will not look at you without a signed letter of intent. Some want a document first, a placement memorandum or an investment memo, and one supplies the tool to write it. Some want the industries you intend to search named before anything else, tied to your own career. Some want a shape of team, solo only or solo or duo. Some want operating experience of a stated kind. Two run their own program and expect you through it first. And several say plainly that there is no condition at all, one of them running a named program for searchers who have no deal yet. The remaining 34 were read on their own pages and ask for nothing, so every firm on this shelf has now been read for this. The shelf leads to a review per firm, and a firm that answered this says so there in its own words.

How Long You Get, And What Happens When It Runs Out

Roughly half of traditional searchers never acquire a company. That is not this site’s estimate; it is what one of the firms on the shelf says on its own page, and it means the outcome a large minority of readers will actually reach is a search that ends without a deal. It is worth knowing what your backers have said about that before you need them to have said it.

Almost none of them have. Of 79 firms, 5 publish how long the search runs and 2 publishes what happens when it stops. The clocks that exist cluster at twenty-four months, with one residency at eighteen to twenty-four and one search budget written to cover up to two years. The single firm that goes further says it sits down with you at eighteen to twenty-four months without a close and decides together whether to continue or to conclude the search.

The shape of that gap is worth reading. A duration costs a firm nothing to publish and a wind-down is a negotiation nobody wants committed to writing in advance, so the half a searcher gets is the half that is free to give. Every firm on the shelf was read for both halves, so the silence is theirs rather than a gap in this review. That makes the question a first-conversation question. Ask what the clock is, and ask what happens at the end of it, before the money is raised rather than after. The shelf leads to a review per firm, where a published clock is quoted and a silence is stated as one.

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 79 firms, 35 publish concrete terms: a check size, a stake, a fee. Ask the narrower question and the number falls again. A check size is what the firm writes, not what you get, and only 12 publish anything about the searcher’s own side: the pay during the search, the equity earned, how it vests. Just 8 publish both halves. Relay Investments, a lead investor in most of the searches it joins, publishes the firm’s half in plain numbers: “Typically 15 to 25% of the cap table and $1M to $3.5M at the acquisition.” The searcher’s half it once published sits behind a login now. In the employed lane WAD Capital publishes both: “Finances 100% of the acquisition, holding about 80% beside the resident's 20%. Up to 500,000 euros of search capital per resident and one to two million euros of equity per deal, by its own pages, and a seller may reinvest up to 8% of the price.” and “A monthly fee through the search, and up to 20% of the equity vesting in thirds: at closing, through the hold, and on an exit at or above a 35% IRR.” NextGen Growth Partners publishes the searcher’s half and not its own: “Up to 25% of the equity by vesting, which it calls identical economics to a traditional search fund, plus the option to put up to 10% into your own search. No page states whether the seat pays a salary.” The rest tell you on the first call, which is why the shelf marks which firms have published terms and which have not. Which lane you are asking decides how much of that you can read before the first call, and the split is not close. Every firm in the self-funded and employed lanes publishes at least what it buys, because both are courting somebody who has other options. A searcher holding a signed letter of intent cannot shortlist a firm that will not say a number, and a salaried program competes with the pay its candidate already earns. The traditional lane is approached rather than approaching, and 11 of its 66 firms publish neither what they buy nor their terms. 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 Buyer Profile 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. The raise itself has its own document, and the traditional lane reads it first: the Search Fund Deck Worksheet drafts each slide in your own words, so the deck arrives saying what you would say in the room. 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.

The Ask That Is Not Equity

One ask should end the conversation rather than start it: a return guaranteed regardless of how the company does. Equity is paid from what the business earns and what it sells for, in an order the Equity Waterfall Calculator lays out. An investor’s preferred return accrues at a rate, 8% a year on the tool’s opening screen, and it is paid only if the exit produces the money to pay it. A promise that pays whatever happens is a loan wearing equity’s name, and a loan sits in the debt stack, where the lender who financed the purchase has already decided who is paid first and on what terms. Anyone asking for that guarantee is asking you to sign personally for their return, which is the guarantee you already gave the bank and cannot give twice.

Before the First Call

Sequence the outreach like the raise it is, which means knowing who can price it. A round needs a lead before anybody else commits, and 7 of the 79 firms here say they lead or anchor, 5 say they will do either depending on the deal, and 4 say plainly that they join a round somebody else has priced. Another 62 were read on their own pages and do not say, which is why the early calls are the ones that tell you rather than the ones you planned. The remaining 1 joined this shelf after the last reading of this field and have not been read for it, which is our unfinished work rather than their silence.

Know which firms serve your lane and what each has published before you write to any of them; the shelf is ordered by how deep into a search a firm comes, and a card links straight to the 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.

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