Thread by @codywagee

Yesterday, I attended the Entrepreneurship Through Acquisition Conference at Harvard Business School.

A few quick highlights from the panel discussions:

- Good searchers know no deal is perfect; have to find something “good enough” and become comfortable with identified risks

- Good searchers know to spend majority of time at top of the funnel (initial sourcing) or bottom (execution); learn to say yes or no quickly

Most important criteria to investors when thinking about target analysis:

- Mission Criticality -> enables pricing power & stickiness

- “Multiple Ways to Win” -> ability to grow through multiple avenues (i.e. acquisition, price increases, further market penetration)

- High # of Targets

- Industry fit with searcher background / experience

- Simplicity to understand and operate

- Small % of customers P&L

- Industry life stage -> find something in “3rd or 4th inning”

- Company revenue growth at time of acquisition

- Industry growth (2x GDP as benchmark)

- High return on tangible assets

- Low customer churn

- Large industry TAM

Investor views on industry assessment:

Three key criteria:

1. Size
2. Growth
3. Penetration

- Market fragmentation can be good (large # of targets for roll up) and bad (there may be a reason why it is fragmented)

- Don’t want market to be dominated by one player (80%+ share)

- Also do not want extreme fragmentation (largest player is 1-2% of share)

- An industry may be “good”, but already picked over

Also, some great insights from a panel of former self-funded searchers (current CEOs):

- Primary motivations for pursuing self-funded search are (1) relative attractive economics and (2) control

- Self-funded gives you ability to be rich AND king

- False assumption that you are not able to solicit “professional advice” -> still able to form board with experience

- well-documented that broken deal costs are big risk to self-funded searchers -> knowing when to bring on 3rd party advisors (QOE or lawyers don’t need to be hired day 1 post-LOI) can help mitigate

- doing education with seller up front can reduce risk of a broken deal

- examples of these items are subordination agreement signature and details of net working capital calc

- other ways to reduce costs:
-> don’t travel to see seller until post-LOI phase
-> can do some QOE items yourself if financially inclined (proof of cash for example)

Thank you to @Robert_E_Graham and @search_invest for hosting the post-conference happy hour & enjoyed seeing @LisaGForrest, @EndresenHeather,& @steveressler IRL!

With nearly 600 attendees, it’s very clear that ETA is a burgeoning ecosystem with tons of growth ahead!

As a reminder for #SMBTwit, I am a self-funded searcher based in SoCal.

Happy to connect with any current searchers, investors, service provider, future searchers, etc. !