Tip of the Spear Ventures

A Family Office that behaves like Venture Capital | Private Equity | Business Consulting

Tip of the Spear

Acquiring a Business – The Process

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The Point: You’ve made the decision that now is the time for you to explore buying a business. But how will you actually go out and acquire a business? In this post, we explore the process involved at a 30,000 foot elevation in acquiring a business and the process… Enjoy!

Acquiring a Business The Process

The acquisition of a small business is not easy, but it can be done. There are many factors to consider such as financing, location, resources, and entrepreneurs who are willing to invest time and resources. Many businesses fail in the first few years and often several factors are involved including management and the way the entrepreneur does business. While many new businesses fail within the first year, more than 25% of all businesses make it through the five-year period with excellent results.

Acquiring a small business requires some patience, education, and hard work to make it successful. Small business acquisition experts must be able to evaluate an acquisition case-by-case basis to make sure that the best opportunities for expansion are available. They must also be prepared to do extensive research and look at different companies in order to find the best ones to partner with. For most entrepreneurs, it takes at least a few years to successfully acquire a small business. Some of the best opportunities come quickly, while others take longer.

When there is an acquisition case to be made, it is important to first determine what kind of business model will work best. There are many options for small businesses, and the best way to determine which business models to consider is to look at the business models of competitors who are successful. This will give an entrepreneur ideas on what features to look for, as well as what to avoid. Successful acquisitions will allow an entrepreneur to realize their full potential and to reach their goals. These are some of the reasons why it can be so difficult to purchase a small business.

SMB Sustainability: Five Urgent M&A Issues and Implications

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Entrepreneurship Through Acquisition Conference Notes | February 2021

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This week we’re participating at the ETA Conference put on by The University of Chicago – Booth School of Business and Kellogg School of Management at Northwestern. If you were unable to attend, or if you did attend and wanted to compare/contrast session highlights, below is the notes that we took.

ETA Day 1

Managing a Search Fund Business – A Discussion with CEOs

Presented by Professional Bank. This panel discussion with ETA operators will focus on three key areas of operating a business – people, strategy, and finance – as well as the challenges and learnings CEOs have found.

Cybersecurity and Implementation

Presented by Mowery & Schoenfeld. “So you own a business, now what?” This panel will take a realist look at the financial, accounting, and cybersecurity challenges facing business owners. Participants will leave equipped with practical tools to help them make solid decisions during the search phase that will set them up for success as an early owner-operator.

Operating and Searching Amidst COVID-19

Presented by NextGen Growth Partners. This discussion will address how NextGen Growth Partners navigated the impacts of COVID-19. They will discuss the various ways their portfolio companies and entrepreneurs-in-residence adapted to unforeseen circumstances, and how they leveraged their ecosystem to weather the storm, innovate, and capitalize on great opportunities.

To access the notes from Day 1, please register below and you’ll have immediate access:

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Family Office as Entrepreneur Capital Source

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The Point: The Family Office as Entrepreneur Capital Source is an avenue rarely investigated, until recently. Why? The Family Office structure is one that is a relatively new “player” in the capital source space. So what do you need to do as an entrepreneur in order to approach a family office and successfully secure capital? In this post, we’ll explore family offices as Entrepreneur Capital Source… Enjoy!

Family Office as Entrepreneur Capital Source

When you are looking into the best way to raise venture capital for your entrepreneurial effort, you need to keep in mind that there are two main options when it comes to raising capital – Angel investors and institutional investors. Angel investors are wealthy individuals who provide small amounts of money to start a new business with the intention of generating a much larger return later on. While these investors do not normally require any particular terms nor have control over organizational operation when providing capital, they are also extremely impatient and lack understanding of the technology and risk issues that you are going through in building your new company as an entrepreneur. Most angel investors will prefer to see a business plan and more importantly, a projected financials so they can get a full picture of the business you are attempting to build.

Family offices on the other hand, run more like private equity firms where joint ventures between entrepreneurs and them as business partner generally require an initial investment. Typically, this relationship is formed because it allows family offices to tap into the entrepreneurial mindset of their entrepreneur partners and receive returns that are superior to other capital instruments. Most family offices that run like a private equity firm prefer to provide capital to small to mid-sized organizations rather than large corporate companies because of the obvious benefit of being personally involved in the business and being able to contribute ideas and help direct the business (Again, don’t overlook the returns!) They also are able to provide a direct exit path from the current project to providing capital to future projects. In order to raise family office capital funding requires the entrepreneur to again submit a formal business plan along with a well-written equity prospectus and a complete financial statement so the family office knows exactly what kind of return they can expect.

Family offices provide a great way for relatively inexperienced entrepreneurs to obtain the experience needed to raise large sums of capital and have a smart-money partner along with them. Because the entrepreneur receives small investments from family offices and not from institutional investors, they typically view paying very good returns on these investments as a small price to pay in return for the capital received to accomplish goals. The key to success is in the collaboration and relationship building between the entrepreneurs and family offices. Family offices are really just an extension of a venture capital outlet, allowing entrepreneurs to access the wealth of the family office entrepreneurial team at a much lower hurdle.

Sam Palazzolo