The Capital Ledger · Edition 06 · 6-minute read
Last edition followed capital around a closed exit window. This edition looks at what that detour now costs the people raising and deploying it.
Second funds are taking longer to close, with fewer LPs on each roster. Searchers need close to two years to buy a company, and four in ten never do. And in September, the cost of financing a deal rose for the first time since 2023. Capital hasn't gone away. It is selecting the managers and buyers who are easiest to underwrite.
The question running through this edition: what does the other side of the table need to see before it says yes?
Hit reply and tell us your answer. We read every response, and the best ones shape what we cover next.
IN THIS EDITION
Fund II Is the New Fund I. Fewer LPs per fund, and what LPs now need to see before a second close.
Time Kills Deals. What separates the searchers who buy a company from the ones who don't.
A Quarter Point, Priced. What the September rate hike means for small-business buyers.
NEW Capital Market Briefs episode on the $682 million ETA market
The Q4 Capital Briefing Lineup
THE SIGNAL
Longer Raises. Fewer LPs. Higher Rates.
Fund II Is the New Fund I
For emerging managers, the hardest raise now comes second.
Carta's data shows LP rosters are thinning. In the first half of 2026, the median venture fund of $100 million to $250 million closed with 44 LPs, down from 59 in 2025. Capital is concentrating at the top: in 2025, 64% of the money raised by venture funds on Carta went to vehicles larger than $100 million.
The constraint is liquidity, not appetite. Private-equity funds raised in 2021 have returned 0.23 times paid-in capital, according to PitchBook. LPs waiting on distributions from older funds have less room for new commitments, and the ones still writing checks are writing fewer.
That changes the test for a second fund. Paper marks alone no longer close a raise. LPs want evidence that Fund I can return cash, operations that look institutional, and transparent reporting. Fewer LPs per fund also means each existing relationship carries more weight. Re-ups from Fund I investors are now the foundation of most Fund II raises, not a bonus.
The managers who close pace Fund I deployment, keep LPs informed between raises, and plan a path to distributions, including secondary sales, before returning to market.
Carta's Davion Louis walked members through this data in the August Capital Briefing. The replay is available to members in ATLAS.
Time Kills Deals
For buyers of small companies, time now matters as much as price.
Stanford Graduate School of Business released its 2026 Search Fund Study in July. It covers 862 traditional search funds in the U.S. and Canada and is the reference dataset for entrepreneurship through acquisition. Acquiring a company typically takes about 20 months. Since 1996, 58% of searchers have completed an acquisition, which means more than four in ten never buy.
The searches that do close have paid off. Across the dataset, search funds have produced an aggregate internal rate of return of 33.9% and a 4.75 times return on invested capital. Measured against the S&P 500, investors earned 2.88 times what the same capital would have earned in public stocks. The median company acquired in 2024 and 2025 cost $16 million.
The gap between searchers who buy and those who don't comes down to process. Owners of good businesses rarely run auctions. The pipeline is built through proprietary outreach, thousands of calls and letters to companies that are not formally for sale. Each month spent waiting for a brokered deal is a month of search capital spent without a closing.
Ownership transitions are the subject of the Nov. 12 Capital Briefing: Ownership Transitions: The ETA & Succession Window.
A Quarter Point, Priced
The Federal Reserve raised its benchmark rate a quarter point on Sept. 16, to a range of 3.75% to 4%. It was the first increase since July 2023. The prime rate moved to 7.00% the next day.
For small-business buyers, the effect shows up quickly. New variable-rate SBA 7(a) loans above $350,000 priced off prime are capped at prime plus 3 percentage points, now 10.00%. Existing variable-rate loans reset at their next adjustment date. On a $500,000 loan amortized over 10 years, the move from 9.75% to 10.00% adds about $69 to the monthly payment, or roughly $830 a year.
That number is manageable. What matters more is where rates go next. The Fed's median projection puts its policy rate at 4.1% by year-end, up from 3.8% in its previous projection, which implies one more quarter-point increase. On the same loan, that would add roughly another $69 a month.
Franchise buyers have less room for error. Royalties and marketing fees already take a share of margin before debt service is paid.
The discipline is unchanged. Underwrite at today's rate, not the hoped-for one. Stress-test cash flow against slower revenue and protect working capital. A deal that works only if rates fall is not ready to close.
What's the hardest part of your next raise or acquisition?
FROM CAN
The back office is part of the pitch.
LPs underwrite the firm as well as the strategy: the model, the reporting, the forecast behind the fund. CAN's Fractional Execution Team gives emerging managers and operators senior finance capacity at institutional standard, without a full-time finance hire.
FP&A: budgeting, forecasting and management-company planning.
Financial modeling: fund, deal and operating models built for institutional diligence.
Execution support: senior finance hands for the work that has to get done between raises.
The Fractional Execution Team provides financial planning and modeling support only. It does not provide investment advice, placement, or capital-raising services.
CAPITAL MARKET BRIEFS
THE MARKET READ
$682 Million in Two Years: Why Investors Are Skipping Startups and Buying Businesses Instead
More than $682 million in ETA equity was deployed across the U.S. and Canada in a recent two-year window, behind a model most investors have never studied.
With a generation of owners approaching retirement and few succession plans in place, this episode our Host, Tariq Collins breaks down how entrepreneurship through acquisition works, why the succession wave is creating rare buying conditions, and the two models used to own an established business rather than start one from scratch.
A companion to this edition's Time Kills Deals, and a preview of the Nov. 12 Capital Briefing on ownership transitions.
THE CAPITAL BRIEFING SERIES
Monthly briefings. Members only.
Oct. 23 and Nov. 12 moderated by Jay Holmes, Founder & Chairman, The Capital Alliance Network
Oct. 23 | How Allocators Screen Emerging Managers. Willis Wilson, Investment Director, Cambridge Associates.
Nov. 12 | Ownership Transitions: The ETA & Succession Window. Keith Spears, nearly 30 years in alternative assets and private markets.
Dec. 2 | What Institutional Capital Requires. Taffi Ayodele (Office of the NYC Comptroller), Dee Sharma, CFA (Northern Trust Asset Management) and Donna Snider, CFA (Hackensack Meridian Health), moderated by Emmanuel Esochaghi of VeraDaniel & Company.
Members can add these to their calendar in ATLAS; replays are available to members. For everyone else, attendance is one invitation away.
All briefings are informational programming. No session constitutes an offer, solicitation, investment advice, or capital introduction.
JOIN THE NETWORK
A Network Built for the Builders
You are building something. A fund. A firm. A portfolio. A career inside the rooms where capital decisions get made.
CAN is a private network for asset managers, sponsors, searchers, allocators, and professionals working in private capital markets. Members convene in person and online, share what they're working on, and find each other across the layers of the capital stack.
CAN's mission is to support the building of $1 trillion in aggregate AUM and enterprise valuations inside the network by 2055.
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A Final Note
“..Play the long game, not the wrong game.
Capital compounds. Relationships compound. Reputation compounds. Everything that lasts in this business is built slowly, on purpose, with people who show up the same way every time.
That's what CAN is. That's what we're building..”
Until next edition,
The Capital Ledger
Published by The Capital Alliance Network
The Capital Ledger is for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy any security or investment product. The Capital Alliance Network is not a broker-dealer, placement agent, or registered investment advisor. References to third-party data, reports, and market activity are drawn from public sources and provided for educational purposes only. All programming referenced herein, including the Capital Briefing Series, is informational and does not constitute an offer, solicitation, or capital introduction.
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