Alidade Ventures

Lessons from My First LOI Recently, I checked off a major milestone in my search journey: my first signed Letter of Intent (LOI). Although the deal ultimately didn’t materialize, it was an incredible learning experience. I wanted to share a few lessons I gleaned from this process. Lesson #1: Early Investor Cadence is Critical Soliciting early feedback from investors is key. Of course, investors cannot make a decision until much later in the process, but feeling out their initial level of interest and understanding the specific questions they want answered can guide your early diligence priorities. This early engagement helps align your approach and ensures you're on the right track from the get-go. Lesson #2: Don’t Waste the First Two Weeks Time is your most valuable asset during a search. Your first two weeks under LOI should be an exercise in rigorously evaluating the deal. Killing an LOI early is not a loss—it saves you significant time in the long run. By the end of these two weeks, you should be confident that the business has no critical flaws and that you are still bullish on the industry. If either of these convictions are missing, it's probably best to move on. Lesson #3: Develop Conviction on Your Offer Price It’s easy to be swayed by the price the owner believes their business is worth or by “other offers” they claim to have received. However, as a searcher, the price has to fit into the model you pitch to your investors. Assume modest growth and minimal multiple expansion. If your offer price doesn’t get you close to a 30% IRR under these conservative assumptions, you’re probably paying too much. The “offer high and renegotiate later” tactic can be risky and potentially damaging to relationships—pursue this strategy at your own risk. Lesson #4: Meet in Person ASAP Don’t delay traveling to meet the owner in person. It’s cliché but true – people do business with people they like. The earlier you can build personal rapport with the seller, the more likely you are to get the deal across the finish line. Don’t be afraid to stay for a few days, even if the owner doesn’t want you on-site quite yet. Being close by and connecting outside of work hours shows your commitment. Lesson #5: Consider Your Board Composition Early The goal of every LOI should be to close the deal – and when it does, you’ll need a board in place. Don’t delay in identifying and meeting industry experts who might later be tapped for a board seat. Closing Thoughts Frankly, I was intimidated by the LOI process through the first few months of my search.?In hindsight, the effort I spent nitpicking and killing good opportunities that weren’t perfect was just a defense mechanism I was using to delay the commitment that comes with an LOI.?If you’re a searcher in the same boat and are reading this – don’t delay any longer! Get out there, get a deal under LOI, and get a rep under your belt.?And as always – if you have any questions, please don’t hesitate to shoot me a DM!