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A diligence fund is a specialized, single-deal investment fund designed to provide the capital needed to cover deal-specific expenses during the due diligence phase. As self-funded searchers scale up to pursue bigger deals, they must also scale up their financial strategies. This often involves converting to a funded search, where upon successful completion of due diligence, searchers can raise the acquisition equity investment from the same group of investors who participated in the diligence fund. These investors typically have rights to participate in the equity round, and the searcher may raise any gap capital from outside investors if needed. In our observation, almost every diligence fund where the deal was completed saw most of the capital being sourced from the diligence fund investors.
Find the rest of Richard Augustyn’s post here.
Micro-SaaS business acquirer Kjael Skaalerud talks with SMB Deal Hunter host Helen Guo about why he chose the niche, how he sources deals, and discusses scaling strategies.
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