The Two-Year "Interview": Turning Search Fund Investors into Your Biggest Champions

I've had the pleasure of working alongside Jason Hew for the past couple of years, and during that time, I've been consistently impressed by his exceptional skills in investor relations. He's a natural communicator, and frankly, he's better at keeping investors engaged and informed than most searchers I've encountered before.

What sets Jason apart is his ability to make investors feel like genuine partners in the search process. He goes beyond superficial updates; he actively seeks their input, recognizing the unique value and insights each investor brings to the table. 

This brings me to an aspect of the search journey that often gets overlooked, the "two-year interview." It's not just about convincing investors to fund your search; it's about building relationships that will last throughout the life of your business. From the moment you start raising capital to the day you close your acquisition, you're being evaluated by your investors. They're assessing your capabilities, your professionalism, and your potential as a CEO.

In this post, I'll delve into why strong investor relations are essential for searchers and share practical strategies for building lasting relationships with your investor base. After all, these are the people who will be with you through thick and thin, offering guidance, support, and potentially continued investment as you navigate the exciting world of entrepreneurship through acquisition.

Why Strong Investor Relations Matter

Capital is the lifeblood of any search fund. And while a compelling PPM and a strong track record are certainly important, they're only part of the equation. When it comes to securing funding, especially for your acquisition, the strength of your investor relationships can make all the difference.

Think about it: if you've spent the past year or two cultivating genuine connections with your investors, keeping them informed and engaged, and demonstrating your competence and professionalism, they're far more likely to open their wallets when you present them with a promising deal. They've had a front-row seat to your journey, they trust your judgment, and they're confident in your ability to execute.

But the benefits of strong investor relations go far beyond successful fundraising rounds. By building trust and rapport with your investors, you're also creating a valuable network of advisors and mentors. These are seasoned professionals who have a vested interest in your success. They can offer invaluable guidance, connect you with potential customers or partners, and even serve as sounding boards for your ideas and challenges.

Moreover, as you get to know your investors better, you'll gain a deeper understanding of their individual strengths and expertise. This can be incredibly helpful when it comes time to assemble your board of directors or seek out strategic partners for your acquired business. You'll be able to identify the individuals who are best suited to provide the specific support and guidance you need to thrive in your new role as CEO.

In essence, strong investor relations are about building a foundation for long-term success. It's about transforming your investors from passive funders into active partners who are invested in your journey and committed to helping you achieve your goals.

So, how do you actually cultivate these strong investor relationships? It boils down to two key elements: communication and relationship building.

Communication is Key

First and foremost, establish a consistent and transparent communication strategy. This doesn't mean bombarding your investors with daily updates, but it does mean providing regular, meaningful insights into your search progress.

Think about it like building a house. Would you rather receive a detailed blueprint upfront, followed by regular progress reports and photos, or simply show up one day to find a finished structure? Your investors are entrusting you with their capital; they deserve to be kept in the loop.

Now, not all investors are created equal. Some may prefer concise quarterly updates, while others might appreciate more frequent calls or even informal check-ins. Take the time to understand each investor's communication preferences and tailor your approach accordingly.

And what should you actually talk about?  Share your insights into the industries you're targeting, the challenges you're facing, and the potential deals you're evaluating. Don't be afraid to ask for advice or feedback; it shows that you value their expertise and are willing to be collaborative.

Build Real Relationships

But effective investor relations go beyond just sharing numbers and updates. It's about forging genuine connections with the individuals behind the investments.

View every interaction as an opportunity to build rapport. Take an interest in their backgrounds, their experiences, and their perspectives. If you're visiting a target company in their area, see if they're free for a coffee or lunch. If the opportunity arises, attend industry events together.

The more you get to know your investors on a personal level, the stronger your bond will become. And that translates into greater trust, more open communication, and ultimately, a more successful partnership.

The search fund journey is a marathon, not a sprint. By investing time and effort in building strong investor relationships, you're setting yourself up for success not just during the search, but for years to come as you lead and grow your acquired business.

Overcoming the Fear Factor

Now, I know what some of you might be thinking: "But Jake, I'm not exactly a social butterfly. The thought of schmoozing with investors makes me break out in a cold sweat." Or maybe you're worried about asking "stupid" questions and looking inexperienced.

Trust me, I get it. We've all been there, but most investors aren't expecting you to be a polished expert on everything. They're looking for someone who is smart, capable, and eager to learn.

So, how do you overcome those nerves and build genuine connections with your investors? Here are a few tips:

• Be prepared: Before reaching out to an investor, do your homework. Understand their background, their investment focus, and their areas of expertise. This will help you formulate relevant questions and demonstrate that you value their time and insights.

• Don't be afraid to ask questions: Investors are a wealth of knowledge. Don't hesitate to tap into their expertise. Asking thoughtful questions not only helps you learn and grow, but it also shows investors that you're engaged and interested in their perspectives.

• Be vulnerable: It's okay to admit that you don't have all the answers. In fact, showing vulnerability can actually build trust and strengthen relationships. Investors generally appreciate authenticity and are more likely to connect with someone who is genuine and open about their challenges.

• Focus on the value exchange: Investor interactions are a two-way street. While you're seeking their guidance and support, they're also looking for promising entrepreneurs to invest in. By demonstrating your capabilities and potential, you're providing them with valuable information that can help them make informed investment decisions.

The bottom line is this: building strong investor relationships takes effort, but it's an investment that pays off in the long run. By overcoming your fears and embracing the opportunity to connect with your investors, you're setting yourself up for success in your search and beyond.

More Than an Interview: A True Partnership

The search fund journey is often called a "two-year interview," but it's more than just an evaluation period. It's a chance to forge genuine partnerships with your investors. These are the people who will be with you through the ups and downs of entrepreneurship, offering guidance, support, and capital as you build and grow your business.

Don't shy away from actively engaging with your investors. View every interaction as an opportunity to build rapport, seek advice, and learn from their experiences. The stronger your investor relationships, the smoother your fundraising efforts will be, and the more support you'll have as you navigate the challenges and triumphs of entrepreneurship through acquisition.

So, if you're embarking on the search fund path, start building your investor network and communication strategy early on. Cultivate those relationships, nurture those connections, and transform your investors from passive funders into active champions for your success.

Action Items:

• Take Stock: Compile a list of your current investors. Include their contact information, investment history (if applicable), and any personal details that might be relevant to building a relationship (e.g., alma mater, hobbies, charitable interests).

• Craft a Communication Plan: For each investor, outline a communication strategy. How often will you reach out? What format will you use (email, phone, video call)? What kind of information will you share?

• Do Your Research: Before your next interaction with each investor, take some time to learn more about their background and expertise. What industries do they specialize in? What are their past successes? What are they passionate about?

• Prepare Thoughtful Questions: Based on your research, jot down a few questions to ask each investor. These could be related to their experience in a particular industry, their advice on a specific challenge you're facing, or simply their thoughts on a recent market trend.

By taking these action steps, you'll be well on your way to building stronger, more productive relationships with your investors. Remember, these are the people who are betting on your success. Invest in those relationships, and they'll pay dividends for years to come.