Fundraising Goes Both Ways

By Dr. Thomas Wetzer, Founding Partner at Pina Capital

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Mutual due diligence is key in today’s Search Fund ecosystem. Parties are locked in for years. A solid partnership between investors and searchers is therefore pivotal. A recent article on Search Fund News, “Fundraising goes both ways…”, rightly emphasises just that. This becomes even more important going forward, as the market matures and capital is more readily available. Platforms have professionalised, and fundraising cycles are often shorter than they were just a few years ago. This means the risk of mismatches increases.

Searchers can close a cap table without fully questioning whether the investors are the right partners for a seven-to-ten-year journey. Investors, in turn, may commit without sufficiently testing the individuals, the operating model and the governance expectations. The outcome is predictable. Many of the issues that future boards will deal with could have been eliminated during fundraising.

Sophisticated investors run a structured but pragmatic assessment process. Speed matters, but not at the expense of alignment. The process usually starts with thorough preparation. A detailed review of the PPM is used to understand positioning. This could include a check on sector focus that aligns with the searcher’s past experience. It helps identify early red flags like an excessive search budget. Investors pay attention to how searchers think about geography, target profile, governance, incentives and their own role post-acquisition. In addition, structured conversations allow investors to go beyond rehearsed answers and understand entrepreneurial grit in depth. In duo setups, particular attention is paid to the working relationship and decision-making dynamics.

Certain patterns typically raise concerns. These include profiles that do not match the ambition of the search. Other concerns might include duos with very limited shared history or fund sizes that are misaligned with the proposed setup. A lack of clear geographic focus or native language capability is another recurring concern. Further concerns include vague or inconsistent financial criteria, incoherent industry focus, no evidence of having engaged with real target companies, poorly thought-through governance or incentive structures, the absence of a credible exit narrative, an unclear post-acquisition role, or weak presentation quality. They rarely end a conversation immediately, but each requires a convincing explanation.

Some experienced investors complement these conversations with a case-based discussion. The objective is not to arrive at a textbook solution, but to observe how candidates approach value creation, prioritisation and management decision-making under pressure. Judgement, structure and business acumen matter more than technical perfection. In addition, personal meetings allow investors to assess presence, pragmatism and the SME mentality. The question is whether the searcher can earn trust with founders, employees, banks and advisors in a real-world and at times very regional operating environment. Reference calls are used selectively to validate leadership behaviour, resilience and openness to feedback.

An investor should identify common ground in operating principles with the searcher. Some investors are deliberately hands-on, others consciously distant. Some searchers, on the other hand, expect frequent interaction and structured governance, others optimise for autonomy. None of these models is inherently superior, but misalignment creates immediate tension.

Alignment also concerns the investor value proposition. A first-time operator stepping into a succession is different in terms of experience than an experienced SME entrepreneur or a former private equity professional. Capital alone is rarely the bottleneck.

Equally important is clarity around modus operandi: how feedback is requested, how disagreement is handled and how accountability works. Investors and searchers need to be on the same page. Fundraising is the moment to discuss these questions openly.

This is how Pina Capital approaches searcher selection. But this approach is not unique. It is increasingly becoming best practice in a more mature Search Fund ecosystem. The best outcomes emerge when both sides invest time upfront to analyze their future journey together thoroughly. Because sooner or later, challenges will arise. Fundraising is not about closing units. It is about assembling a group of partners you genuinely want around the table when the pressure is high.