Funless Sponsor

The trials and tribulations of sourcing, structuring, fundraising, and closing deals in the middle market.

[Funless Sponsor @FunlessSponsor]

We closed our first deal as an independent sponsor a few weeks ago. It’s a nice service business with good margins in a niche corner of the market. We’re in at a fair price with reasonable incentives for everyone involved. If we execute, we’ll do well. You might think that I’d write a thread espousing all the tips and tricks that we used to execute this acquisition.

That’s not this thread.

We’ve been at this for 3.5 years and just closed our first deal. Here are all the things I wish I’d known as a non-PE guy co-founding an IS firm. I have a small audience on X, but hopefully this is valuable to a handful of folks. If not, writing this was a good exercise for me to reflect through.

Sorry in advance. No sunshine and rainbows here.

[Funless Sponsor @FunlessSponsor]

@sourcesandmuses 1) posts like these are why X blows LI out of the water

2) congrats on the raise

[Funless Sponsor @FunlessSponsor]

If this is true (big if), billions can be made in US oilfield services right now. You can get good-sized, high-margin companies for low multiples today.

But where will you find the equity to execute?

[Colossus @colossusmag]

In June, Matthew Smith wrote a letter to a small group of confidants about the U.S. natural gas market.

"This will sound like heresy. Energy, power, and AI heresy."

In it, he projects an unprecedented natural gas shortage beginning in late 2028.

By 2030, working gas storage could be exhausted entirely.

Gas is the marginal fuel for electricity in most of the country. When it becomes scarce, everyone pays. Hyperscalers, LNG buyers, and households alike.

The letter was never meant to be public.

We asked if we could publish it so listeners could see the full work.

It includes the model, the math behind it, the winners and losers, and his rebuttals to every objection he expects.

He said yes. Full, 20-page letter in the comments.

[Funless Sponsor @FunlessSponsor]

Agree. You still need a strike zone, but sitting back and waiting for a fat pitch won’t work.

[Eric Hsu @lawyer4SMBs]

Unpopular opinion: most first-time buyers are way too focused on finding the "perfect" business.

There's no perfect business. There's a decent business you have some transferable skills to run at a fair price w/ a seller who'll actually work with you.

That last part matters more than the industry, the multiple, or the growth story.

Tell me I'm wrong.

[Anduril Industries @anduriltech]

Thunder. The New Era of Attack Aviation.

[Funless Sponsor @FunlessSponsor]

This is the recently-written platform of the DSA. They’re suddenly well-funded and are completely serious about this.

https://t.co/Lp3h3fTnrc

[Steve Wiesner @SteveWiesnerSMB]

Note to Dads who have activities with their kids today.

One day, sooner than you think, those days will be over.

I would give anything, ANYTHING, to get those days back again.

When they strike out w bases loaded: it's a gift.

When they spill their milkshake in the back seat: it's a gift.

Mess up the windows with their muddy hands: a gift.

Complain about how long the drive is taking: gift.

I don't have many regrets in life, but one of them (a BIG one) is not being present enough when I should have been and not having the right perspective at times.

So today, watch the game, enjoy the game, and recognize there are a bunch of people out there like me who would pay anything to be in that seat again.

Those are the moments that matter in your life, and they're fleeting.

The moments that don't matter...

Sending another email. Having another client call. Having another meeting.

Be an amazing dad to your kids. There's no more important job on the planet.

[Funless Sponsor @FunlessSponsor]

@dealflow_guy It’s a great deal for the non-recourse investors.

But like @HockJohannes says in his last sentence, if you go all-in and it hits, you better not have to go all-in ever again.

[Funless Sponsor @FunlessSponsor]

I had no idea there were searchers signing PG’s with less than 50% of the economics. Yikes.

[Johannes Hock @HockJohannes]

In light of another WSJ search fund article dropping, here's a hot take. I don't think a 5x EBITDA deal with 25% equity is worth it for the searcher.

It doesn't sound like much, but the difference between 10% and 25% equity almost cuts your economics IN HALF, while your bankruptcy risk barely goes down (more on that below).

In my opinion, self-funded search has always been one thing: you take a ton of risk (lever up with PG) and if you survive, you are set for life on a single deal in about 5 years.

That's what the math works out at 4x EBITDA and 80-90% ownership. It doesn't work out at 5x EBITDA and <50% ownership. The latter is a bad economic trade for the searcher.

You'll hear every investor tell you to overequitize. Yes, that does derisk the deal, but the real winners are the investors here. What good does a deal do you that still has a ton of risk but you don't have homerun upside on the other side. The potential to make $1-2mm over 5-7 years with a ton of risk is not a good trade for the average searcher. Most of you can just keep a $200-400k job with no bankruptcy risk.

For the deals I have seen gone bad, having 75% debt instead of 90% would not have saved them. In small businesses when things go bad, it's often binary. So all that extra equity you raised barely reduces risk and but gives a ton of the upside to investors.

6 months of fixed cost is plenty of cash in the bank. If it takes more than that, the business likely wasn't going to make it anyway. And yes, someone will bring up a scenario where a business was saved by having 7 months. Doesn't matter, when you are going down this path you are playing the average odds. If bankruptcy is an impossible risk for you, then don't get SBA debt. You're better off getting paid carry at that point.

TLDR I don't think signing the PG is worth it if you don't have the chance to be done if your deal works out.

[Funless Sponsor @FunlessSponsor]

@therobertbrooks The seller was expecting his note to be pari with the SBA?

[Acting Secretary of the Navy Hung Cao @SECNAV]

Flight debrief complete.

No reprimands. No firings. No problem.

That’s the sound of Freedom!

Semper fi and Hooyah.

[Blake Scholl 🛫 @bscholl]

We did a collab with @linear on how Boom uses software to accelerate hardware

[Noah Schochet @noah_schochet]

Today, we’re announcing that we’ve raised $115 million in funding, including a $100M Series A led by @kleinerperkins.

America has lost the ability to build, and we’re here to restore it. My co-founder, @NoahMcGuinn, and I left our jobs at @SpaceX , where we worked on programs including Starship, Starshield, and @Starlink, to build a company that will solve construction’s greatest challenges.

Infrastructure is the foundation of civilization, and construction is the precursor to innovation. If America wants to build a brighter future for the next generation, we have to make it faster, cheaper, and safer to build.

That’s where @TerraFirma_Inc comes in. We’re a new type of company, a robotic construction company that builds the full technology stack needed to deliver an order-of-magnitude improvement in one of the world’s oldest, largest, most important, but least efficient industries.

We are building technology that expands what’s possible in construction on Earth, and then we'll use that same technology to build megastructures and colonies on the Moon and Mars.

We’ve made tremendous progress over the past year, growing the company more than 10x in the last 12 months. We are performing projects across the world. By the end of October 2026, we are on track to operate 3 of the top 3 largest robotic construction fleets in the world, each on a different continent, bringing unprecedented speed, scale, and efficiency to some of the world’s most complex critical infrastructure projects.

This funding will allow us to step on the gas and scale our manufacturing, software, operations, and construction deployments, including work on massive commercial and government contracts.

We’re building the future of construction right here in Austin, Texas, and scaling it globally. If you want to be part of the team changing the world, now and on Mars, join us.

Our Series A was led by Kleiner Perkins, with participation from Bain Capital Ventures, Glade Brook Capital Partners, BANNER VC, Saga Ventures, Trust Ventures, Definition, PEAK6, Magnetar Capital, and Ravelin Capital. Huge thanks to all of our angel investors, friends, and family who have helped and supported us throughout this journey.

Apply here: https://t.co/BmXHSGJQQk

[Paul W. Swaney III @paulswaney3]

https://t.co/7W4UhH3mkT

[Blake Scholl 🛫 @bscholl]

Symphony rotor fully stacked

[P Equity Research 📰 @pequityresearch]

Morgan Stanley: Bearings

The Big Picture: Bearings as a Core Robotics Play

> Architecture-Agnostic Growth: Bearings offer a diversified way to invest in the robotics sector because they are required regardless of a robot's ultimate design or form factor.

> Massive Market Expansion: Morgan Stanley forecasts a massive ~300x growth in the robot bearings market through the year 2050.

> Low Risk of Obsolescence: Bearings face very low substitution, in-sourcing, or obsolescence risks—you simply cannot design moving machines around them.

> OpenAI Endorsement: In a recent Request for Proposal (RFP) for U.S.-based hardware manufacturing capacity, OpenAI listed precision bearings as 1 of 6 critical components in its robotics category.

Content Scales with Robot Complexity

> Bearings 101: Every single motor in a robot requires at least one or more bearings to reduce friction and support rotating parts.

> Degrees of Freedom (DoF): As robots get more complex, the number of bearings multiplies.

Small quadcopter drone: Requires 8–12 bearings.

Humanoid robot: Requires 70 or more bearings.

> Pricing Variability: Depending on the specific use-case, individual bearings can range from under $1 to as much as $100

Global Bearings Market Dynamics

> Consolidated Supply: The top 6 global manufacturers control over 50% of the global roller market, with Chinese manufacturers making up about 25%.

> Current Demand Split: Roughly 40% of the overall market goes to industrial equipment OEMs, 30% to automotive, and 30 to distribution channels

[Funless Sponsor @FunlessSponsor]

@dantasman

[NBC10 Boston @NBC10Boston]

A Sail Boston sunrise. Tall ships participating in today’s Sail Boston extravaganza are seen with various stages of this mornings sunrise, starting with a Massachusetts state police helicopter doing a quick scan of the area and then lots of colors. 📸@pictureboston

[Funless Sponsor @FunlessSponsor]

Some of the stats look a little funky.

ISF probably has the best dataset, but I don't think it's scrubbed. They send out an Excel file to the database and ask for it to be populated and returned.

Most deals being done by relatively few firms is probably the most important punchline in there.

Thanks for sharing.

[Blake Scholl 🛫 @bscholl]

Boom also had a board meeting where the board told me to shut the company down. XB-1 hadn’t broken the sound barrier yet. The team deployed in the Mojave desert was exhausted from months of fighting tough technical issues. We had only a few weeks of cash left and no one saw a path forward.

My audit committee chair quit without notice. At first, I was pissed. I told her she would make it look as if we had an accounting scandal when in fact we were squeaky clean.

But eventually, I realized the attrition was a gift. Hard times are a crucible for the truly committed. Boom had acquired some fair-weather friends, on the board and inside the company, and when times got tough, they all ran for the hills.

It was some of Boom‘s darkest days, but we also found out who was really with us. I’m grateful for the team, the board members, and the investors that doubled down with us when the chips were down. We wouldn’t be here without you. Supersonic flight would still be illegal.

Alex Gerko, @paulg , @sama, @reidhoffman , Michael Moritz, @jgebbia, @davidcowan, @avichal, @collison, @ycombinator saved Boom and gave the world a real shot at supersonic passenger flight.

[Funless Sponsor @FunlessSponsor]

@Clearingfog_ @BuffaloBillCo Ah, talking past each other a bit. I’m referring to the opportunity. You’re referring to action. 🤝