When Grant Hensel talks about his fund, he's very clear about one thing: he didn't start it to make money.

Not in the short term, anyway.

He started it because he'd built a 60-person agency, bought a business with his wife, invested personally in searchers he believed in, and then had a handful of mentors tell him: you should do this at scale, properly. He's the managing partner and founder of Entrepreneurial Capital, a fund that backs self-funded searchers: people buying and then personally running profitable, unglamorous small businesses. He raised over $12 million. He's deploying it across 13 to 18 total investments. He pays himself nothing from the management fee.

And he'd do it again.

I sat down with Grant to unpack how the fund came together, what he learned about raising capital from individuals, what separates a real searcher from a tourist, and why the economics of fund management are not what the LinkedIn posts suggest.

What came out of it was one of the more honest conversations I've had about what it actually takes to formalize an investment thesis and why doing it right means being comfortable losing money on the short game to win on the long one.

The Origin Story: Too Much Capacity, Not Enough Chaos

Grant built Nonprofit Megaphone into a 60-person digital marketing agency serving nonprofits. By the time it reached that size, he'd done what the best founders do when they're honest with themselves: he removed himself from the operations and gave control to a COO who eventually became CEO.

And then he had time.

"I would cause problems actively if I put all of my energy into the business," he told me.

That spare capacity, combined with a curiosity about M&A as a growth lever, led him to develop skills he didn't have. He found a business. He ran a search. He and his wife Julia bought Lexigate, a law firm SEO agency she now runs and operates. He started investing personally in other people's acquisition deals. The returns looked good. The deals were interesting. Mentors pushed him to professionalize it.

That's how Entrepreneurial Capital was born, not from a business plan, but from an accumulation of experience that happened to line up better than a traditional finance career would have for the market he was entering.

"The lower, lower, lower middle market is just wildly different from anything an investment banker would be dealing with," he said. "It's a knife fight. A small business operational knife fight. And I feel at home in that because that's what I've been doing for the last 10 years."

Building the Fund: What Nobody Tells You About the Process

Grant started the way most first-time fund managers do: he made a pitch deck. He and Julia were in Thailand for vacation. They built it at the airport.

The first real move after that was a classic fundraising technique dressed up in polite language: ask for advice when you want money. He went to mentors for input and found that a meaningful number of them wanted to back the fund directly.

He engaged a fund formation law firm — The Investments Lawyers, led by Michael — in January 2025. Their process was disciplined: work through the terms first, build a term sheet, go fundraise, and only complete the full formation documents once capital commitments are materializing. It's a practical sequence that keeps legal costs from running ahead of momentum.

The fund was structured as three entities: a management company LLC, a limited partnership where all investor capital pools and investments are made, and a GP entity. The LP agreement, the document that actually governs the relationship between everyone, runs north of a hundred pages. Grant describes it as basically saying "this is a standard fund and all the standard rules apply," but getting there still requires a law firm that knows what they're doing and a founder willing to learn the language.

Reg D 506C was the exemption they chose, which allowed public discussion of the fund in exchange for two things: clearly communicating that the investment is only available to accredited investors, and verifying that status rather than relying entirely on self-attestation.

"Once the decision was made," Grant said, looking back, "I realized how much my past experience actually lined up for this. Better than investment banking would have."

Fundraising: Warm Networks, Webinars, and the Zero Value of Cold Email

Grant had 160 one-on-one investor conversations between February and June of 2025. He raised most of the fund's $12M+ in that window. Everyone told him fundraising would take 18 months and be miserable.

They were wrong on both counts.

Almost every dollar that came in arrived through some form of warm relationship. People he'd been to college with. People he'd met through Entrepreneur's Organization. Friends of friends. LinkedIn posts that surfaced the fund to loose connections who'd known who Grant was and trusted what they saw. A webinar that drew over 150 attendees and produced millions in commitments from people who showed up because they already knew him, or knew someone who did.

The things that didn't work were instructive in their own way. Paid newsletter placements produced nothing. Investor acquisition agencies produced, by his count, essentially one investor, a person he liked, but not a return on the marketing spend. Cold email was, in his words, a clean zero.

"People need to trust two things," he said. "They need to trust you, and they need to trust the thing you're doing. And that just requires probably hearing you talk for about an hour. Podcasts are a good way to do that. Cold email is not."

The minimum commitment was $100,000. Their average ended up around $150,000. The largest individual check, including Grant's own, was $1 million. No institutional investors. Roughly 80 limited partners total, all individuals.

The fund's original target was $5 million. It became $10 million. They ended up closing above $12 million before officially stopping in October 2025 — not because demand dried up, but because deal flow was strong enough that they could responsibly deploy more, and at some point you have to stop taking calls and start doing the work.

The Economics Nobody Wants to Hear

If you've seen a LinkedIn post promising that starting a fund is a path to wealth, Grant would like a word.

The math is simple and a little sobering. A 2% management fee on a $10 million fund is $200,000 a year. Once you subtract insurance, fund administration, legal, technology, and team expenses, there's nothing left. Grant pays himself nothing from it.

Carry, the 20% profits interest that kicks in after returning invested capital plus a hurdle rate to LPs, is where the real economics are. But carry is long-dated. You need to return everyone's money first. In a fund that's deploying over a two to three-year period and expecting a seven to ten-year hold, that math doesn't resolve for a long time.

"It is not a direct cash generation mechanism by any stretch of the imagination," he said. "You only become rich from a fund if you have other income in the meantime or you're running a much bigger fund."

There are games people play in fund management: fees charged against the fund, transaction fees layered onto deals, that can change that calculus. Grant chose not to play them. He views Fund One as a long-term reputation play, not a short-term income source. The only purpose of Fund One, in his words, is to demonstrate that he can be a trustworthy steward of other people's capital.

Fund Two, whenever it comes, will be larger. His target is $25 to $50 million. But that number is entirely dependent on deal flow. He's not willing to raise more than he can responsibly deploy.

What He's Looking For: The Deal Criteria

Entrepreneurial Capital invests in self-funded searchers acquiring small, profitable, enduring businesses. The minimum size they'll consider is $750K in SDE. Their preferred multiple is no more than five times. They look for low customer concentration, capital-efficient operations, businesses that hold up in a recessionary environment, and companies unlikely to face dramatic technological disruption.

"No, it's the most boring criteria ever," Grant said when I pointed out how universal it sounds. "It's just: we want an enduring business."

The fund reviews roughly one deal per business day. Out of hundreds, they're looking for four to five investments per year — maybe fewer. Deal flow is the entire game. Which is why Grant posts consistently on LinkedIn, runs a newsletter, goes to conferences, and does podcasts. Not to build a brand. To make sure every searcher looking for capital knows Entrepreneurial Capital exists.

Their check size ranges from $300K minimum to a preferred range of $1M to $1.2M. They'd rather make a small number of concentrated, high-conviction bets than spread across too many deals and lose the ability to be genuinely useful to their portfolio companies.

Selecting Searchers: The Real Black Box

If the deal criteria is boring by design, the searcher evaluation is where the real intellectual work lives.

Grant is trying to answer questions that don't have clean answers: Will this person run through walls? Are they trustworthy? Can they learn fast enough? Do they have the IQ and EQ to be dropped into a small business where a lot is on fire and figure it out?

The process starts with a team screen, escalates to a call with Grant, then, if things are still looking good, a meeting in person. Ideally at the business's location. Ideally with the seller in the room, so Grant can watch how the searcher and seller interact.

From there: reference checks, background checks, credit checks, and an attempt to find second-degree connections who can speak to the person's character and operating track record.

"If you find the right person, it's incredible," he said, and then told me about a searcher, someone he'd personally invested in before the fund, who bought a small HVAC business in Florida and is on track to more than double revenue in his first year. No incremental marketing spend. Just doing everything better and being, as Grant put it, "world class."

He didn't know the guy was world class when he invested. He knew he was good. There's a difference, and that gap — between knowing someone is good and knowing they're exceptional — is the thing he's trying to close with better assessment tools. He mentioned a group working on psychometric screening for senior government positions and Navy SEAL candidates that he's now exploring. The idea being that the most important input in the whole fund is the least systematized.

What He'd Tell First-Time Searchers

Grant's advice for anyone buying a small business is short and non-negotiable.

"Put more cash on the balance sheet at close than you think is necessary. You will thank me later."

Beyond that, his biggest recurring note to the searchers he works with is to lead with problems. Don't hide the difficult parts of a deal — pre-close or post-close. Surface the issues early, ask for help thinking through them, and solve them collaboratively. It's both the skill you need to get deals done and the fastest way to build the trust that makes investors want to back you again.

He looks for searchers with personal liquidity, relevant operating experience, and a seriousness that doesn't come from a course. In his words, you should be able to ask yourself: would I hire this person to run a division of a business I own? Many searchers he encounters, the real ones, not the tourists, pass that test. The tourists rarely even make it into his inbox.

Still Early Innings, But the Field Is Getting Selective

Self-funded search has gotten popular. I asked Grant where he thinks the market is.

He believes we're still early. But he sees the field getting more selective in ways he thinks are healthy.

SBA underwriting is tightening. That's raising the bar for who can access the financing that makes most self-funded search deals possible. Grant thinks this filters out some of the noise, buyers who were playing at acquisition without the personal liquidity, track record, or operational seriousness to make it work. It also means sellers with SBA-eligible businesses can and should expect better buyers.

He also pushes back on the idea that more buyers means compressed returns. The market for small businesses is still wildly inefficient. Sellers getting divorced need to sell. Founders retiring want out on fair terms. PE hasn't moved this far down-market yet. The inefficiency that makes great deals possible isn't closing. It's just harder to access if you're not the right buyer.

"There are plenty of searchers massively overpaying," he said. "And there are plenty getting incredible deals. It's the only asset class I know of that isn't governed by the efficient market hypothesis."

The Part That Surprised Him Most

Grant said he enjoys the investing work more than he expected. More, even, than entrepreneurship — which he rates as a ten out of ten. He gave investing an eleven.

What he loves is working with a small group of highly capable, motivated people trying to do hard things, and being useful to them. His CliftonStrengths profile skews toward maximizer — helping great people become exceptional. That's not a teacher's job. It's a coach's job. And across a portfolio of businesses, it's a full-time role he finds deeply satisfying.

He's also transparent about the fact that he's essentially volunteering his time in the short term. His fund expenses nearly offset management fees. He's the largest LP. He's doing investor relations, deal sourcing, and portfolio support with a small team. There's no short-term economic case for it.

Except the long one: Fund One is the proof of concept. If he does it right, Fund Two is where the compounding begins.

"The only purpose of Fund One is to demonstrate that I can be a trustworthy steward of other people's capital. That's it."

Grant Hensel is the founder and managing partner of Entrepreneurial Capital. You can reach him on LinkedIn at Grant Hensel or at entrepreneurialcapital.com.

Listen to the full conversation with Grant on the Agency Acquisitions & Exits Podcast.

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