Searchers acquire and operate a single business. HoldCo builders acquire and operate multiple. Roll ups integrate multiple of the same kind into one operation. All three offer generational wealth if done correctly. None are passive.
For investors looking to own a piece of Main Street without the headache of day-to-day management, a number of online platforms, funds, and sponsors make it simple.
I’ve invested in 3 SMB acquisitions over the last year as an LP and wanted to share my experience sourcing and backing high-quality passive investments. From platforms and private funds, to networking with searchers and independent sponsors: each has its own advantages, risks, and return profile, but all share one thing in common: access to the kind of deals typically reserved for industry insiders and private equity pros.
Best Ways to Invest in Small Business Acquisitions
Key Features
- Direct access: Browse live SMB acquisition deals led by vetted searchers raising equity.
- Transparent terms: Each deal page clearly shows preferred returns, equity splits, and hold period targets.
- Automated process: Paperwork, capital calls, and distribution tracking are handled directly through the platform.
- Community driven: Connect with searchers and other investors to exchange diligence insights and learn from past transactions.
- Low friction: Like AngelList is for VC investing, Mainshare democratizes ETA investing — minimal admin, quick onboarding, and clear communication from deal leads.
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MainShares is my favorite, most accessible entry point into SMB investing. The platform makes it possible to invest alongside experienced operators who are under LOI to acquire real businesses with very favorable terms.
I’ve personally evaluated about a dozen deals on the site and invested in one led by an ex-military operator acquiring a private security firm in Sacramento. The process was smooth from start to finish. The deal offered a 10% preferred return with a 2.6x equity step-up, and all the paperwork and fund flows were handled seamlessly within the platform.
What I appreciate most is the clarity: each listing includes detailed investor terms, projected returns, and operator bios. It’s easy to filter by industry or deal stage, and the dashboard automatically updates with documents, capital calls, and eventual distributions. I highly recommend meeting with the operator before investing, as they are the main driver of returns.
If you’re looking for a hands-on way to back real operators without running the business yourself, MainShares hits a sweet spot — accessible, transparent, and purpose-built for ETA accredited investors.
Pros
- Clean, transparent deal listings with standardized terms (PACT)
- Automated capital management and reporting
- Great operator quality and deal terms (equity step up, strict governance, liquidity preference, etc.)
- Lower minimum investment (~$25k)
Cons
- Deal flow can be limited depending on timing
- Smaller deals compared to larger PE platforms
- Minimums vary per deal, so allocation planning is needed
Key Features
- Community-based model: Pool resources with other investors to access larger, higher-quality deals.
- Curated dealflow: Only a handful of opportunities make it through their screening process.
- Passive ownership: Participate in profitable, stable businesses without operational involvement.
- Diversified exposure: Ability to invest across multiple industries and deal types.
- Flexible cadence: No pressure or fixed schedule — deals are launched only when they meet strict criteria.
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CapitalPad feels like a natural evolution of the ETA investing ecosystem — a bridge between one-off deals on MainShares and fully managed funds like Entrepreneurial Capital. I came across the platform while looking for a more curated, “hands-off” way to invest in small business acquisitions.
Their philosophy resonated immediately: focus on “boring” but profitable small businesses, not speculative startups or shiny tech bets. The team is selective, publishing deals only when they’re truly confident in the operator and structure. That discipline shows — each opportunity I’ve reviewed has had clear terms, solid financials, and a realistic growth plan.
What I liked most was the balance between access and quality control. You’re still investing directly into deals, but you benefit from pooled diligence, collective leverage, and more favorable investor terms. It’s ideal for investors who appreciate SMB economics but don’t want to build an entire portfolio from scratch.
I’ve participated in one of their recent rounds — the process was smooth, the communication was clear, and the reporting cadence made it easy to stay informed without micromanaging. It genuinely feels passive, yet you’re still close enough to understand where your capital is going.
Pros
- High-quality, rigorously screened deals
- True passive exposure to profitable small businesses
- Strong alignment between platform and investors
- Flexible pacing — no pressure to deploy capital
Cons
- Limited deal frequency (quality over quantity)
- Minimums can vary depending on the deal
- Still a relatively new platform, so historical data is limited
3. Entrepreneurial Capital
A $10m+ fund led by Grant Hensel that writes equity gap checks to elite searchers
Key Features
- Diversification across deals: Entrepreneurs Capital targets acquiring 13–18 small businesses to spread risk.
- Preferred return + step up: They offer an 8%–12% annual non-compounding preferred return before equity upside.
- Equity step-up mechanics: Investors typically receive a 2.0× to 2.5× “step up” on equity — e.g. your invested capital gets a boost in share percentage upon closing.
- Target IRR & multiples: The fund aims for ~24% net IRR to investors.
- Deal selection via self-funded searchers: They back operators (searchers) who bring deals under LOI or are already operating targets.
- Governance & structuring: Fund holds a 10-year default life. Capital calls over 2–3 years.
- Investor minimum & open status: Minimum commitment is $100,000.
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I invested in Entrepreneurial Capital’s first fund because I believe deeply in Grant Hensel’s ability to source and close amazing deals. 6 months in, it has been one of the most rewarding channels I use for SMB acquisitions despite being entirely hands-off. I get to see how seasoned investors in the space allocate capital, what deals make them salivate, and how they structure terms for favorable outcomes. I have no doubt the fund will hit its high IRR targets
What appeals most is scaling via portfolio construction. Instead of waiting on a single deal, you get optionality across a curated set of businesses. In my fund, the manager leveraged his search-operator background to vet searchers, sensitize returns, and enforce discipline in deal terms. The clarity of preferred return, step-up, and waterfall mechanics made my modeling easier (versus opaque deal-by-deal co-invests).
The downside is you don’t pick every deal. Sometimes a specific business might interest you, but you don’t have line-of-sight to invest in just that one. Also, since the fund is locked for a decade, liquidity is a nonstarter — but that’s par for these private vehicles.
In sum, this route is ideal if you want to outsource deal origination, diligence, and administration, while still participating meaningfully in the SMB acquisition space.
Pros
- Risk mitigation via portfolio diversification
- Professional structuring and governance
- Passive — no need to source or vet deals yourself
- Clear, standardized terms (preferred return, step up)
Cons
- Lack of individual deal control
- Capital locked for long periods (10 years typical)
- Potential dilution or cross-deal conflicts depending on fund structure
Key Features
- Investment Focus: Profitable, lower-mid-market businesses (~$1M EBITDA) with steady cash flow.
- Capital Range: Typical equity checks between $1–3 million per deal.
- Partnership Model: Backs independent sponsors or searchers post-LOI to close acquisitions.
- Sector Coverage: Active across SaaS, manufacturing, and B2B services.
- Operator Alignment: Requires strong operator credentials, IRR targets above 30%, and preferred returns for investors.
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Minds Capital bridges the gap between solo searchers and institutional investors. Instead of sourcing deals from scratch, you’re backing operators who’ve already identified and negotiated a business under LOI — a stage where capital is most needed but risk is still manageable. The platform’s clarity around both company and buyer criteria helps investors understand exactly what filters are in play, something many newer independent-sponsor platforms lack.
I found their deal examples refreshingly varied — from a SaaS loyalty platform to a concrete-floor coatings business — showing flexibility across sectors without losing focus on stable, profitable companies. Minds Capital’s model appeals to those who want exposure to SMB acquisitions but prefer a curated, operator-led approach instead of browsing raw deal listings or committing to a long-term fund.
Pros
- Strong alignment with operators who invest alongside you.
- Transparent criteria for both deals and acquirers.
- Diverse portfolio across stable, cash-flowing sectors.
- Post-LOI entry reduces early-stage deal risk.
- Clear return targets and governance structure.
Cons
- Illiquid until exit; capital is tied up for several years.
- Reliant on operator execution and post-close performance.
- Deal flow may be limited due to selective criteria.
- Shorter track record than more established funds.
4. Independent Sponsors
Key Features
- Deal-by-deal investing: Sponsors source, diligence, and structure each acquisition, then raise capital for that single deal.
- Institutional quality: Deals often range from $5M–$30M enterprise value, with detailed CIMs, lender participation, and formal governance.
- Alignment: Sponsors typically invest their own capital and earn carried interest after a preferred return hurdle.
- Sector expertise: Many sponsors specialize in industries like manufacturing, healthcare, or business services.
- Co-investment access: Investors can take limited partner stakes in deals with defined terms and expected hold periods (usually 4–7 years).
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Networking with independent sponsors is a natural progression once you’ve built confidence in the ETA world. Sponsors are usually former private equity professionals or repeat operators who run the deal end-to-end — sourcing, financing, operating, and exiting — without a committed fund behind them.
I’ve found this route offers the most professional deal experience among passive SMB investments. Sponsors typically present comprehensive models, lender commitments, and third-party diligence reports. You can underwrite the deal much like a small PE transaction but still invest smaller checks (sometimes starting around $100K).
The trade-off is access — these deals aren’t public, so building trust and relationships is key. You might see only a few deals a year, but quality tends to be high. For investors comfortable reviewing private equity-style materials, it’s an excellent way to capture institutional returns without fund fees or intermediaries.
Pros
- High-quality deals with institutional underwriting
- Strong operator alignment (sponsor capital at risk)
- Professional reporting and transparency
- Access to larger deal sizes and better financing terms
Cons
- Requires network and relationship building
- Higher minimums per deal (often $100K+)
- Deal flow is infrequent and not standardized
5. Network with Searchers + Independent Sponsors
You can find attractive deals seeking silent investors via online communities like Searchfunder
Key Features
- Direct networking: Communities like Searchfunder make it easy to meet searchers and sponsors under LOI across many industries and geographies.
- Smaller check sizes: Typical investments in searcher deals range from $25K–$50K, with equity upside tied to the deal’s success, while sponsored deals are typically larger and command slightly larger investment minimums
- Early entry: You can join at the LOI stage — after a target is identified but before closing — for high potential returns.
- Transparent structure: Searchers share CIMs, financials, and plans directly; you interact with the operator, not a middleman.
- Community learning: Many investors syndicate insights, legal docs, and lessons learned from past ETA deals.
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Networking with searchers has been the most personal — and surprisingly educational — way to invest in SMB acquisitions. I’ve met dozens of operators on Searchfunder, ranging from first-time buyers to serial entrepreneurs rolling up niche service businesses.
These deals often happen at the micro end of the market — think $1M–$5M EBITDA — where hands-on operators can meaningfully improve the business. Investors usually get a preferred return plus equity, though terms vary widely. The key is evaluating the searcher’s background and operational plan as much as the business itself.
For me, the appeal lies in seeing deals early, before institutional capital crowds in. You can negotiate directly, build relationships, and sometimes roll your equity into future acquisitions. The main drawback is diligence load — each deal is bespoke, and quality varies. But once you identify capable operators, the returns and transparency can be excellent.
Pros
- Early access to deals with strong upside
- Smaller minimums and flexible terms
- Direct relationship with the operator
- Tight-knit, collaborative investor community
Cons
- Highly variable quality between searchers
- Limited liquidity and exit clarity
- More diligence required per deal
Concluding Thoughts
Investing passively in small business acquisitions isn’t just for private equity. With online platforms, emerging funds, and a growing network of searchers + sponsors, it’s easier than ever for individual investors to gain exposure to private, cash-flowing SMBs without operating.
If you’re new, start small. Review open deals on MainShares, scan communities like Searchfunder, and read up on fund managers. Over time, you’ll develop intuition for how to deploy capital into this highly promising asset class.
The small business acquisition space rewards patience and curiosity. The best investors here aren’t chasing trends — they’re building long-term relationships with capable searchers and capital allocators.
