Notes from 6 months of search and many conversations with potential searchers

Thinking About Raising

  • The absolute starting point is reading the Stanford Primer on Search Funds and Selected Observations from Stanford and IESE.
  • Additional must-reads include the HBR Guide to Buying a Small Business and Jan Simon’s ETA book.
  • Jim Sharpe’s and Steve Divitkos’s (Mineola) blogs offer great practical advice.
  • Blogs and podcasts provide valuable insights, though they don’t replace 1:1 conversations. They can, however, help you have more informed discussions, particularly if you are going to talk with someone that actually gave the interview
  • If you’re starting outreach to search fund investors, at least read the Primer and HBR guide—this will make your conversations more useful and insightful.

Writing the PPM

  • Keep it simple—don’t overdo it.
  • If you’re raising in an established market, investors already know the model. Use Stanford’s template or a colleague’s PPM and customize it. This shouldn’t take more than a day, except for the industry analysis.
  • Industry analysis: PPMs typically include 3–5 pages on industries relevant to the searcher and geography. Common approaches include plain industry descriptions with value drivers, case studies, or an industry scan with potential targets. Whatever the format, it should be simple and aligned with your background and the search fund model—focusing on stable, asset-light industries with recurring revenues.
  • Budget: Benchmark with colleagues and propose something reasonable. If you plan to deviate from norms (e.g., a salary above USD 100K in Brazil), be prepared to justify it.
  • Writing the PPM helped me articulate my motivations for the search.
  • In frontier markets, the PPM is more useful for explaining the model to new investors.

Reaching Out to Investors & Fundraising Strategies

  • In Brazil, searchers typically start with local investors, then move to Europe/Central America, and lastly the USA.
  • Some searchers reach out to all investors at once—especially if attending a major conference (e.g., IESE) or leveraging an MBA/internship at a fund.
  • In frontier markets, you can start with frontier investors (e.g., Ambit, Novidam) or secure local investors first, then approach traditional SF investors.
  • To find investors, check past searchers’ cap tables in your region and identify common names.
  • In Brazil, key investors include Spectra, Kviv, KYR, Allievo, TMB3, and Kanoa. Internationally, focus on Spain and Central America. US investors are less active unless you have strong connections or are searching as part of a duo.

Talking to Investors

What to Look for in Investors

  • Investors vary widely—AJ’s article covers key factors to consider.
  • Institutional vs. Private Investors: Institutional investors may have shorter time horizons due to LP constraints, while private investors may have longer or even indefinite investment horizons.
  • One good investor advised balancing availability, operational/local experience, and investment experience (“white hair”). On availability, not all investors need to be involved daily, but you should know who will support you when needed.
  • Search fund experience is also valuable—bringing in former searchers/operators can make a difference.
  • Some investors raised concerns mid-search about my cap table, specifically regarding the equity gap and support for executing the acquisition.
  • To address equity gaps, identify 1–2 investors willing to write larger checks.
  • For M&A support, prioritize funds with larger, more involved teams.

From Fundraising to Fund Launch

  • Once 50–60% of your fund is raised and you’re confident about closing, start engaging service providers (lawyers, accountants—both in Brazil and the US).
  • Recruit interns early—balancing hiring and dealflow (talking to 150+ brokers) is tough.
  • Define key processes early (pipeline creation, NDA execution, financial modeling) to ensure interns can contribute effectively.
  • Capital call sequence in Brazil (if using a traditional structure—LLC in the US, LTDA for the fund): Call capital in the US, convert USD to BRL, adjust the LTDA agreement and cap table, then call capital from Brazilian investors. Connect with other searchers during this phase for guidance.

Initial Months of the Search

  • Jim Sharpe’s advice: Your job is to send proposals.
  • Metrics matter: Jan Simon & Jim Sharpe suggest that having an LOI signed within 6 months is a strong indicator of a successful search.
  • In Brazil, industry focus tends to be broader—the market isn’t deep enough to justify weeks of research on an industry that may have only a few viable companies, none of which are for sale.
  • Send LOIs. Don’t spend weeks on Q&A and industry analysis just to learn the owner expects 8–20x EBITDA, while you’re offering 4–5x.
  • If you forgot the previous item, send LOIs!
  • On sending LOIs fast, also important to have judgment on filtering and targeting companies that are adherent to the search fund model (i.e., investable companies)
  • If you are sure that a company is adherent to the model (e.g., a SaaS company with churn below 5% and growing +20%), there are strong benefits of acting fast
  • If you are unsure about the adherence of the company to the model (e.g., CAPEX requirements, asset heavy), it might be worth than to better understand the company and validate your thoughts with investors
  • Always listen to your investors. No point in signing a LOI (or worse, spend time and money on a DD) in a deal that is not investable
  • The level of freedom and independence (and loneliness) is likely beyond any other I’ve ever experienced. Investor will be involved as much as you push them too. I suggested to err on the side of excess
  • For reference (first 4 months of my search): Signed ~35 NDAs, sent 5 IOIs, converted 2 to LOIs. I didn’t focus on large numbers like “I looked at 15,000 companies.” Instead, I tracked NDAs—ensuring I targeted businesses aligned with my mandate.