How Two Self-Funded Searchers Raised Equity to Close Their Deals

Last programmed event of the whole conference. My name is Will Smith, I host Acquiring Minds. What we're going to do on this panel is have a conversation with a couple of business buyers, searchers, who raised capital to make their acquisitions. We heard from Tony this morning, the investor perspective, but we haven't really heard what it's like for searchers to find, work with, and raise money from investors, and then what it looks like not only pre-acquisition but post-acquisition.

Both of these gentlemen raised money for their acquisitions. Very different stories. Every story in this world is unique and messy. We're going to get two totally different perspectives and hopefully shed some light on what it looks and feels like to raise money from investors. Costa Diub was on stage yesterday, but Costa, refresh our memory. Who you are, what you bought, and give us some bullet points on the role that the investors played in your deal.

Costa: I bought a tree trimming business called Bluma Tree Experts in Seattle in February of last year. I had a pretty classic self-funded deal structure, so 80-ish percent SBA leverage from Live Oak, a little bit under 10% seller note, and then I raised capital and put in some of my own equity. I have 12 investors in the deal who are in a pref, just like self-funded deals, and then I have a majority of the common and all major governance rights.

Kevin: I'm Kevin Behen. In January I purchased Heritage Fabrics out of Concord, which is just north of Charlotte, North Carolina. My deal structure was actually fairly similar. I had about 70% debt from SBA, 20% seller note, 10% equity. I also have about 12 people on my cap table. My minimums were 50,000. I probably should have raised it.

Will: Let's hear a little bit for people who've maybe never raised capital. Both of you just said about 10% of your deals was equity. Costa, what is it, how does that work? How is that 10% made up?

Costa: The standard self-funded deal structure on the equity side: of that equity amount, roughly 10% of the total purchase price, the searcher usually puts in somewhere from zero to 20% of the actual equity capital. The investors put in somewhere from 80 to 100% of the equity capital. The investors' money goes in as preferred equity, which means it's sitting behind the debt, ahead of the common, the searcher. Sometimes the searcher gets their actual capital as pref. Mine is not, so they're just sitting in the common.

The way this works is that the investors' pref has a return on it. In my deal, it's 10% annualized. Before I get a dollar out of the deal, the investors need to have a 10% annualized return on their capital, which we call return on capital. They need a return of their capital, which is the initial pref amount, and then there's a common equity split behind that. Every incremental dollar, the common equity split is where the searcher gets their economics, which in most cases the searcher lands with 65 to 80% of the common equity behind the pref layer.

Will: Anything to add, Kevin?

Kevin: That's probably better than I could say it.

Will: For anybody in this room and people listening later, how did you go about learning about this? Costa, you have a PE background, so you came into this knowing how to do deals. Kevin, I think you were a little less informed about how this works. Raising money from investors for people recently into search is mysterious and intimidating. What did it look like when you were first starting out?

Kevin: When I was first starting out, it was 2017, 2018, and the HBR guide had just come out. I found it on the Harvard Business Review podcast where they were doing a summary of the book. I remember falling in love with the story about buying a porter potty business. I'm like, that's exactly what I want to do.

I ended up getting a deal under contract in 2018. Long story short, it fell apart in financing. They told me I needed a certain equity amount, and then they were like, actually, we need you to double it. I had put every nickel into this deal, so I didn't have any more money. I had to walk away because I didn't know how to raise equity. I knocked on a couple doors and didn't get anywhere.

Fast forward, I'd gone to corporate and was there for five years. Eventually I was like, I actually still want to do this. I started going on Twitter and networking and finding that there was a whole community that had sprung up between 2018 and 2022 that just didn't exist before. Suddenly I realized, just because you're self-funded doesn't mean you can't raise equity. I had that disconnect. I thought self-funded was, oh, it's just all of my money. That was a nice surprise.

Will: One of the first steps in this process is connecting with investors. We were told by Tony earlier that you should do that earlier in your process rather than later. How did you all meet your investors?

Costa: If you're coming into this cold and just listening to the podcast, not in the room, you should get on Twitter. That's step one. Twitter is easy. Step two, Sam Rosati now has a list that's pretty public of people who are interested in investing in these types of deals. The key thing is people have given a sense of what they're interested in, so you're not trying to blanket email everybody. Start to find people that seem like they might share the type of deal interest you have. Reach out and say, listen, I'm in the search process. I don't have a deal yet. This is what I'm looking to do. Or even better, when you're searching, you're always looking at five or six deals at a time. Have one or two deals to chat with them about.

The goal is to be able to work with an investor who thinks about the world the way you do. You're going to be married to this person for longer than you've probably been with your significant other. The more conversations you can have with them before you need them to commit to a deal, the better, because then you're aligned. That means there's less likelihood for a miscommunication down the road.

Kevin: That sounds really smart and is probably what I should have done, but I didn't do that, because I didn't know any better. I was terrified to raise money. I came into this thinking it was all my own capital going into it, then realized I could raise money. Then I still didn't know how to do it, and I was afraid to do it.

I partnered with a group, an equity provider, that gave me a commitment letter. I felt like I was on top of the world. I had been given a $5 million equity commitment letter and I was going to be a master of the universe. Three days before my LOI was signed, I got a call that said, actually, we're just really busy, so good luck to you. I was faced with a decision whether to fold on the deal or just try to figure it out myself.

The first phone calls I made were to Sam Rosati, Kevin Henderson, and Eric Pacifici, and told them what I was going through. They said, no, you can do it, you can raise the money. Right around that time is when Sam published his list of what he calls public domain investors. I wasn't surgical going through that list. I emailed the people who said they only invest in HVAC deals because I didn't care at that point. I just wanted my deal out there.

It was trial by error, figuring out how to communicate with investors and what they were looking for. I changed my pitch multiple times, just trying to test it and figure out what would actually stick.

Costa: In fairness, there's ideal and then there's, you've got to get your deal done. I didn't talk to an investor until after QoE. So by doing that, I gave myself a really limited window to raise capital, because in your 90-day period, if you're 45 days in and suddenly we close in six weeks and I don't have a nickel yet, then you grind and figure it out. I ended up raising 800 grand in five weeks, which was incredible for me because I had never done it before.

Will: Let's actually hear what the proper chronology is in the ideal situation.

Costa: You've got two sources of capital, debt and equity. So you should also in parallel be learning the lenders, meeting lenders. Right pre-LOI, you're flashing numbers to lenders. You want to make sure you're getting a leverage read that is in line with what you think the deal's going to work at.

Let's stick to equity. As soon as I was under LOI, I created a really simple investor deck, laying out the deal, what the terms are roughly going to look like, and why I like the business. That investor deck I went to this list of investors I wanted to talk to. What I said to them is, look, right now I don't need a number from you. What I need is a general thumbs up, thumbs down, are you interested? In a big ballpark, how much equity in theory would you want to invest? That was step one. The last page of that deck is, these are the things I'm planning to do for the next 60 days. I'm going to do a QoE, I'm going to inspect the assets, whatever. There's a whole list of stuff. At the end of that, I'm going to come back to you with an updated memo that explains the results of that diligence, and that's when I'm going to ask you to tell me a number.

Kevin: A lot of investors talk about, communicate with us prior to your deal, and I don't know that I necessarily believe them, because when you reach out and you're trying to have a coffee chat, you're like, okay, well talk to me when you get a deal. But publicly it'll be, oh, just reach out when you're early stages. That doesn't really work, in my experience.

Since I started raising, I had a compressed timeline. My ask was much more aggressive at that point. I built an investor sim and went through that whole process and sent it out. At the end of the pitch, it was, so how much can I put you down for? I can't knock it because it worked, but I don't know that I recommend doing that.

Costa: The other benefit of getting to space it out is you can tranche your investors a little bit. Coming from a private equity background, I could get a deal done. The minute the deal closed, I don't know what I'm doing. For me, I put a ton of value in being able to have a few investors that were small business owners themselves. What I wanted to do first was reach out to a select few investors with that background, figure out what their number is before I went to the wider list. They wouldn't be enough to fill the whole round, but I didn't want to accidentally squeeze out or downsize folks that could offer that kind of value-added investor experience. By giving yourself that time, you can be a little bit more selective.

Kevin: Costa and I have very different backgrounds. I come from operations and sales, Costa comes from finance and PE. I actually ended up using a bastardized version of the model he used, unbeknownst to me at the time. I got it through another searcher, and then I continued to bastardize it and just beat it into submission until it gave me numbers that would make the bank happy.

Will: This question of value-added investors versus just purely writing checks. What sorts of alignments or value similarities are you looking for, and to what degree can you just look for cash?

Costa: One, I'm looking for a duration match. I needed my investors to understand that there's a scenario in which I don't sell this company forever, and they need to be okay with that. They will get their cash back, but it will most likely be through distributions, not through a big liquidity event, which meant primarily going to high-net-worth individuals, not institutional investors. You need a duration match. You need a governance match, kind of what Tony was saying earlier, they need to understand that I'm going to have majority of the governance control, and they need to be okay with that, which is also a factor of trust. The third is the value add. There are a lot of great small business owners who are investors, but are they actually excited about talking to me? Are they excited about picking up the phone when I don't know what to do? The first time I need to put an employee on a PIP, is somebody going to pick up the phone? Because of the investors I chose, the answer was yes.

Kevin: When it's a mad scramble, it's whoever. Do you have a pulse, do you have a bank account, are you breathing? Then I want to talk to you. I talked to 300-plus people. It took a lot of work. I felt very comfortable in the small business operation space. I grew up in small business, even though I worked in large corporates too and ran divisions. I'm comfortable now that I'm in an ownership position. Unlike Costa, I wasn't comfortable in the deal process or the raise, because I'd never done that before.

I didn't really care about whether investors had industry experience. I have a bunch of lawyers on my cap table, commercial insurance brokers. Their industry experience didn't really matter to me. I really cared about fit. Is this person somebody I want to take a call from? Is this somebody I genuinely enjoy talking to? Some investors as I got later in my raise, where I had enough money and I was going to close, I didn't call back, because we had an initial conversation and it was like, that's kind of a dick, I don't really want to work with this guy. That was an exciting place to be, that you can be selective at that point. If you can be selective, that's the best way to go about it.

Costa: One other, I did not want investors who I didn't feel confident understood the risk profile of what we're doing. I've got friends in tech, and they've got the money to invest. I just didn't want to have to educate them on this is a small business leveraged buyout that has a high risk of going to zero. I don't want to have that conversation after the fact of why I lost their money. I don't want to lose any of my existing investors' money, but I think they have an understanding of what we've gotten ourselves into.

Will: That precludes friends, but family as well?

Costa: I don't have any family investors either.

Kevin: I don't have any money in my family or any rich friends. Everybody I raised from was a stranger.

Will: Would you generalize that advice, Costa, that you didn't want people who don't understand the risk involved?

Costa: People can make their own decisions. It's not my fault if somebody takes a risk they shouldn't take, or if they don't fully understand the risk. There is some element of buyer beware in the capital markets, but for me personally, I felt kind of a moral responsibility.

Will: We're talking about being able to be selective. Contrast this with Silicon Valley, where you hear the story of the startup entrepreneur knocking on every door on Sand Hill Road and getting tons of nos. It feels like if you have a deal that pencils in this world, the money is there, the capital is out there. Do you both feel that way?

Costa: The capital is out there. You're smarter if you're selective about who you reach out to.

Kevin: I spun my wheels. I reached out to traditional search funds. I downloaded a list of all the SBICs in North Carolina and contacted all of them. I went on SearchFunder, for better or for worse, looking for investors. I got laughed at multiple times for my terms. I got every kind of response. I offered pretty good terms for a self-funded deal in the traditional sense, but you wouldn't know it based off some of the conversations I had, which were really defeating. It was, these are the worst terms I've ever seen, who would ever invest in this deal? Just makes you feel about that big.

Will: But you stayed true to those terms ultimately?

Kevin: I did. I didn't have to modify the terms. I was prepared to if I needed to, because I was determined to close this deal. I would have given up more equity if I had to, but I didn't have to.

Will: You just talked about going through many investor calls and how some of those made you feel pretty small. You also said that you got better at those conversations as they went. What does a good performance on the buyer-searcher's part look like?

Costa: It is a sales call at its core. You are selling a deal to them. You're trying to win their capital. The problem is, it's such a long-term relationship that you don't want to have to sell them on it. You want to be able to explain the merits of the deal, explain the risks, and make sure you're going to lock arms with them on this journey together. For example, in my deal, I was very explicit, hey, EBITDA's going to go down for probably two years. Now that EBITDA's gone down, I'm not getting calls from my investors. To me, that was an important part of the process. For the right type of investor, that candor and transparency is welcomed, and that's the right type of investor for me. This is if you've got the privilege of having time and selectiveness.

Kevin: I didn't even know about a J curve when I did my model. I certainly wasn't smart enough to model in that EBITDA will decrease, but guess what, if you buy a business, you're not going to be stagnant. You want to grow. You're going to spend more money. I didn't really make that connection until I was in the seat. Our cash balance is kind of low. Well, yeah, because you're reinvesting a lot more dollars than the previous owner was. Probably something I should have considered and modeled in, but I didn't know any better.

A successful investor call is alignment on values, alignment on what they would expect out of you as an operator. I had one investor specifically request that we send monthly financials. That's not a problem for my company. We do reviewed financials. It's very buttoned up. That was easy to agree to.

I got better at it over time. I started with this much broader pitch, and eventually I figured out that what the investors wanted, at least the people I was vibing with, they wanted to know when their capital was getting returned. How quickly can you get me my money back? What's my pref rate? Equity is sort of blue sky. It's worth nothing to them until you do distributions. Even then, it's not a huge amount in our space, because they might own a couple points of equity. They want to earn money on their initial investment. They want to earn their 12 grand a year on a $100,000 investment.

Costa: I was selecting for investors who thought about it the opposite, where they don't really, I mean they want to know that the money's there, but they're not asking for the distributions to happen right away. They would rather that compound. I was selecting for folks who would like to own it for 30 years, because that means we've found something to do with that capital in the business for a long period of time.

Kevin: I didn't know that was possible. When I looked at the model, when I looked at the landscape, it was, oh, you hold for five to seven years and you sell. Even as I was raising, I kept thinking, I don't really want to sell. Once I get in, I don't want to think about flipping this in five to seven years. I just didn't know that other people did that. I didn't know to look for investors that were committed long term, that don't need distributions. Like I was talking about with Mike earlier, they don't do distributions, they kept everything in the company. I didn't know that was an option. I thought we had to dividend the cash out.

Costa: What I actually told my prospective investors was, I don't really know what we're going to do with this. I'm going to spend two years heads down in the business, and there are three paths. One, we keep growing it organically. Two, we start growing it inorganically. Or three, we start running it for cash and distribute.

Will: That third option, Costa, does that include you continuing to work 40, 50, 60 hours in the business? A lot of us are attracted to this opportunity, hard workers willing to take risk, but we also envision a future of being able to have freedom. Taking on investors can feel a little like taking on bosses. Do you feel like, all of a sudden I've adopted a few bosses and I can't have this freedom that's the whole reason I'm in this game?

Costa: For me, what I would love to be able to do, I showed my investors a base case that gets to a mid-30s IRR, which is kind of standard self-funded equity economics. I would love to get to a point where I can say, hey guys, I'm going to offer to buy out your equity such that you've earned a mid-30s IRR. You can choose not to sell to me, but now we're locking arms for a different ride, which is a little more freedom-centered on me and still cash flow generative, to be clear. If they don't want to sign up for that, then I can buy them out on the terms I'd pitched them on initially. I do feel kind of a moral responsibility to get to that end point.

Kevin: I'm thinking about doing the exact same thing. It's something I've actually been thinking about this weekend. I don't want to cash out all my investors, but I think providing that opportunity is pretty powerful. They're people that have earned money on their money, and you give them the option to get out of the deal completely with a great return. That'd be a great option.

Will: Kevin, you talked about how one of your investors going into the acquisition asked for monthly financial reports. Let's pivot to what the relationships look like now that you're both in the seat post-acquisition. How much are you each communicating with your investors?

Kevin: I send a monthly update that has basic financials, kind of discussion of how the month went, and some high-level KPIs.

Costa: I do the exact same. With that investor who requested monthly financials, I give monthly financials to everybody. Not always on time, but we try to close the books by the 15th.

Kevin: It's a great opportunity to get in front of your investor base. Especially if you have a large cap table like us, those people, some of the guys on my cap table took a flyer on me, 50 grand, which is nothing to them, but was a ton to me. They run a $12 million family office, so there's more capital available. If we do a good job, then we can go back to the well. Having that investor relations function and understanding that it's your job to keep courting the people on your cap table, make sure they're happy and aligned, I find the monthly update to be powerful.

Costa: More crucially, if you do a bad job, they should see it coming from a mile away. So that if you do need to go back to your investors and say, hey, we need some more capital to make this work, they're not blindsided. They've understood why because you've given them the color over many months. They have faith in you that the plan you have is going to work. As the owner of a business, you have an important responsibility to constantly reduce your cost of capital, whether on the debt side or the equity side, and transparency with your lender, transparency with your equity, is how you do that.

Will: We've heard that explicitly. Tony this morning was talking about one of his investments going sideways, and he's only hearing about it now, and the guy's coming back to him for more money, and he's like, no thanks. I've heard Lisa say many times, and other lenders, if something is starting to go badly, let me know sooner rather than later. That is the law to live by.

You both have said now that you had 12 investors, which is a crowded cap table. What is the norm and what are the pros and cons of having a lot of people on there?

Costa: From what I've heard from other self-funded searchers, it sounds like eight to 12 is normal. Some that were a little more careful are more like four to six. I wasn't sure how many investors it would take. Twelve is probably a little too many, but I overshot in case I was undersubscribed.

Will: How much did you end up raising?

Costa: Around 400-ish.

Kevin: The reason I have 12 investors is because I raised 800 grand and my minimum was 50, and most people took that option, which is great. It allowed more people to get into the deal. It allowed that large family office to write a small check and take a flyer on me. I had a couple of $100,000 investors and $250,000 investors, but the rest were 50s.

Will: Going back to being selective and strategic in who you choose, have either of you leaned on your investors for challenges in the business? Have they delivered value other than the cash yet?

Costa: Definitely. Different investors have different skill sets. I have gone to multiple of them over the past 14 months with very tactical questions, more strategic questions. You've got this group of really well-paid consultants that are sort of working for free with every incremental hour they give me. They've got equity.

Kevin: The way I set up my deal was, if they invested $100,000 or more, they got a board seat. That's how I managed my 12-investor cap table. The people who gave 150 and 100 are now on the board. What's nice is two of the investors on there are sales guys. I have a large outside sales force distributed all over the country, and salespeople need incentives. It was something I wouldn't have thought about until they, we had a board meeting last month, our first one, and they offered up advice. I told them I was having some problems with the sales staff, not problems, but trying to figure out how to push them in a new direction, work some of the smaller accounts. They were quick to offer advice and follow up, because they live this. They manage sales teams. That was an unexpected gift from my advisory board.

Will: Anything you would have done differently in your raise process? Any pitfall to avoid?

Kevin: It's very daunting out there, but trust me, if I can do this, if I can raise money after never being in finance or having no idea how to do it, and needing to talk to people like Sam every couple weeks and be like, okay, investors get term sheets, what do I need to do for that? Subscription docs, I don't know what the hell that is. The best one was, Sam, how do I call capital? I don't know how to do that. Things you hear and you're like, oh, I've never done that before, I don't know what that means. There are people around here who are really willing to pitch in and help, to a person. I haven't met somebody in this space who doesn't want other people to succeed. The lesson is, believe in yourself because you can do it. The money is out there, and if you have a good deal, the capital will come.

Costa: That's exactly what I was going to say. If you're going down this self-funded path or traditional path, the wheel's been created. You don't need to recreate the wheel. It's all the people in this room. You can just ask us, we'll show you how. It's pretty straightforward actually. If you've got a good deal, the equity's there for the deal almost by definition. Otherwise it's not a good deal.

Will: It also feels like our world is still quite small, and there are a few nodes and connectors, Sam being an obvious example, Tony. It feels like a domino effect. If you knock down that first domino, the rest are easy to get introductions to. Is that fair?

Kevin: There are some super connectors in our space like Sam and Steve Ressler, and that helps a lot on the self-funded search team. Everybody in that world. You've probably got somebody in your world that's interested in this. I've got five of the investors on my cap table from my finance career, folks from that world. Just getting the ball rolling helps a lot. One of them was more than willing to write a much bigger check, and that gave me the confidence to lean into the rest of the fundraise with my front foot. Getting that first one done really feels good.

Kevin: To go on the point of super connectors, let's just be honest, there are a lot of lazy people out there who have money to deploy, and they look for certain people who are on a cap table, and then they will just go invest. That's fine. You can use those people too. They're not bad people. They're somewhat outsourcing their diligence to another provider. It happens all the time in Silicon Valley. It happens in this space too. Oh, this person's on the cap table, they like this deal, that must be a good deal then. You can spin your wheels, but connecting with the super connectors is going to return dividends.

Costa: In our space in particular, the super connectors are shockingly generous with their relationships. They're not holding deals for themselves or just for their people. They're really generous with that. We're lucky to operate in this space.

Will: Let's open up to Q&A.

Audience: Kevin, you said you talked to 350 potential investors. What did you use to manage all that? Was it 349 nos until you got a yes?

Kevin: I wish I had a wonderful answer for this. I had a lot of ADD during the process. Make sure to ask Sam what his favorite CRM to use is. He loves that question. He'll talk to you for two hours about CRMs. I tried to use a CRM, but I am too ADD and it didn't work. The answer was Excel. I made a spreadsheet, put a date on there, the last contact, what they soft committed for. I made notes to my future self. The funnel is real. You need a big top of funnel, especially if you don't have former finance people who used to be on your team. The list is a great place to start. There are 250, 300 people on that list. I went out and added more, scraping LinkedIn and doing Google searches of random PE firms.

Costa: I had a spreadsheet with name, NDA sent, NDA received, teaser sent, teaser received, interested, not interested, amount of money. One shout out: Live Oak has an equity worksheet that helps you calculate the 20% PG threshold that is super useful for making sure you're keeping everybody under the right thresholds so they don't trip into PG world.

Will: One plug for CRMs: CRMs come from managing sales relationships, and as Costa said earlier, this is a sales process. Using a CRM will help reinforce in your own mind that you are selling, and you should manage all those points of contact.

Audience: I'm Cody, a self-funded searcher based in Southern California. How did you arrive at the ownership percentage you negotiated on the common? There are different target IRRs you can be trying to ask from an investor, and when you model it out, you could do some distributions early on to juice it. How do you practically get to 70% or 75%?

Costa: The percentage of equity you get as a searcher is an output of the quality of your deal and the amount of leverage you're putting into it. If you are doing max SBA leverage, the investors for that type of risk profile need to be earning a mid-30s IRR in a reasonable base case, which means mid-single-digit revenue growth, not 20% annual revenue growth. If you build that model, you can figure out what return that implies the investors need and what equity that means you get as a searcher. If that number is smaller than you wanted, it means you don't have that great of a deal.

Kevin: The way I approached it: number one, I had to raise quickly, so I wanted to offer aggressive terms. Number two, I was buying in an industry that most people were like, really? I bought a textile business. We import, we design here in the US and we import product from India and Turkey, then we wholesale distribute throughout the country, throughout the world. Most people did not like that industry, so I needed to offer aggressive terms, and I did. You can also pick an IRR you want to get to and back into it that way. I just looked at it as, I saw what the standard was: you need a two-times equity step up and a 10% pref rate. Okay, let me sweeten the pot. Let me do a two-and-a-half times step up and a 12% pref, and maybe that'll attract the capital I need. It wasn't rocket science. It was just putting it out there and seeing if anybody bit.

Cody: I ran a Twitter poll and asked, if you're an investor, what do you think is a target IRR? There were votes across the board: 25%, 30%, 35%.

Kevin: If you voted 25%, reach out.

Audience: Did either of you have lead investors that you particularly negotiated terms with, and then everybody else got the same terms? How many investors did you negotiate with on terms, pref rate, et cetera?

Costa: I just set what it was, and everyone signed up to it. To be clear, I probably could have gotten better terms, but I was operating with the idea that these are people I want to work with for a long time. I would love to raise more money from them in the future. This isn't my only bite at the equity apple. I left some money on the table from the jump, and everyone signed up to the deal I offered.

Kevin: I wanted a lead investor. I had $800,000 to raise in short order, so I tried to get those $500,000 check investors and struck out. I didn't have a lead investor. Investors did ask me, hey, if you end up offering better terms, I want to participate in the same terms that everybody else gets, which I think is a fair ask. If they commit early and they get worse terms than somebody who commits late, that's pretty crappy. I offered that to everybody. Everybody would participate in the same terms.

That's one of the reasons I've joined a fund recently, in order to be that $500,000 check investor, that lead investor for searchers. I joined a bunch of guys, we're about to go raise $5 million and put that money to work in these self-funded deals. A deal my size, about $7 million enterprise value, I raised 800. This fund could take out 500,000 to 600,000. Then you have a small friends and family round, which you could raise in this room in an afternoon if you have a good deal.

Will: Last question. Now that you're in the seat, what keeps you up at night, and what keeps you excited about going to work every day?

Kevin: I love going to work every day. I really do. I told Sam Thursday when I got in, this is the first time in my life where I don't feel like I'm in a hurry to do something else. I always asked myself, do I want to be doing this when I'm 50, at different points in my career? That was always my litmus test, and the answer was always no. I don't, this is fine for now, but I don't want to keep doing this. This is the first time in my life where I'm like, yeah, I want to be doing this in 20 years, 25 years.

It's fun to build something, to put your own spin on things, your own stamp. I bring my dogs into the office. My wife comes into the office. She doesn't work full-time in the business, but she has an office there and works on her corporate job there. It's like we're still working from home like we did over Covid, but now we work from home with a bunch of other people, and we spend a ton of time at the office.

What keeps me up at night right now is working capital. We have a pretty working capital intensive business. It's an inventory business. When I took over in January, I had to wire $300,000 overseas for inventory for our spring collection. I did not have $300,000 in my bank account. Fortunately, I did get a substantial amount of working capital in the deal, but it also matures a little slow. It trickles in. Even if somebody demands an upfront payment of $300,000, I can pay them, I just can't pay them right now. You have to negotiate for extended terms. That's being mitigated as we add a line of credit. Please don't ever buy a business without a line of credit. You heard it from me first, or maybe last. Never buy a business without a line of credit. It's also a lot harder to get the line of credit after you close. You're telling me at the time of closing.

Costa: Similar thought. For the first time, I feel deeply calm that I'm building towards a vision. The iterations through private equity, which I loved as an intellectual endeavor, there wasn't a 10-year path I could envision myself staying on. I now have a vision of what life looks like 10 years from now. Right now it's tough. It's a rollercoaster day to day, a lot of difficult days, but I'm actually building towards something for the first time. It feels like I'm building something for my employees, for my clients, for my city. That's deeply gratifying.

What keeps me up at night is the next thing. There's always something to do, always something going wrong. Right now I need to learn how to do sales and marketing. This is not a skill set I have at all. We need to figure out how to drive demand growth, because without that, I don't have a way to offer my team ways for them to grow. That keeps me up at night, and that's just going to keep rotating to whatever's next. That's a small problem. I don't have an existential crisis keeping me up at night. I know what I'm doing.

Will: It's your problem, you get to solve it.

Costa: It's not somebody else's problem that you're paid to fix. It's my problem. Now I just need to suck it up and solve it.

Will: Costa Diub and Kevin Behen, thank you very much for coming up here and sharing.