A Look Inside the Empire Flippers Capital Operator Vetting Process
Empire Flippers Capital (EFC) is a fundraising platform that allows qualified operators of online businesses to raise outside equity capital.
We ran two successful investing rounds in 2021, during which funds were raised for two to three months followed by a 90-day acquisition period. Once the businesses were acquired, the operators started managing the assets and are now implementing growth strategies to scale them, with the end goal of generating strong returns for investors.
The operators for EFC have track records of successfully running and scaling online businesses.
Investors choose operators based on their track record and planned operation strategy. The investors invest funds to own a fractional piece of the businesses run by the operators, from which they receive quarterly distributions.
In Round 2, we received a lot of interest from highly qualified online business operators. A high number of online business operators who are a part of the Empire Flippers (EF) community have recognized the attractiveness of EFC in helping them raise outside capital.
Only 5% of operator applicants were accepted after an in-depth due diligence process. If you’re interested in applying to become a future operator, fill out our Operator Interest form and share your experience, strategy, and current and past portfolio performances.
We are diligent in our vetting process to ensure that only qualified operators can participate. Operators must have a track record in the exact monetization type for which they are raising funds as well as their own capital to invest alongside investors. This article will review our operator vetting process and what it takes to become an operator with EFC.
The Vetting Process Step By Step
Step 1 – Review Operator Interest Forms
The form is a questionnaire asking high-level questions about the operator’s online business experience and any past and/or current portfolios they are running. It only takes 10 minutes to complete, and they can submit the form at any time throughout the year.
The main criteria our vetting team will assess are the number and type of businesses the operator runs in their portfolio.
After they submit the form, our analysts will review the information provided to ensure that they have the experience necessary for the program.
Step 2 – Assess Shortlisted Candidates
Shortlisted candidates who meet our criteria receive a second, more detailed questionnaire specific to the monetization type they are an expert in.
The questionnaire asks for detailed information about the following:
- Their current and past portfolio: the size of businesses, how they were acquired, and how they are managed.
- Their team: the growth strategies they employ and how their team operates.
- Monetization-specific experience: inventory management for FBA, Google algorithm updates for content sites, among other experience criteria.
Candidates may be invited to send a video introducing themselves. This allows us to get to know them personally, and it gives them an opportunity to share more about their experience and goals.
We will also confirm the candidate’s readiness to co-invest in their target fundraise. Co-investments vary from round to round but will typically be 5% of the deal value.
Step 3 – First Interviews
During the first interview, the candidate will be invited to meet with the EFC team, discuss the program in detail, and elaborate on their motivations for participating.
In this step, we like to get to know the candidate better as an operator and as a person, so we dig further into the information they provided in previous stages of the application process. We will ask them a predefined set of questions about their track record, past successes and failures, and their long-term goals.
The aim is to understand their acquisition criteria, including their target deal size, monetization, and niche. We will also ask about their current team and processes.
This interview stage is an opportunity for the candidate to learn more about the program and determine whether it’s a good fit for them.
Step 4 – Listing Evaluation
In this step, we will ask the candidate to identify listings on the EF marketplace as potential acquisitions and put together an analysis as if they were going to acquire those businesses. This analysis will include a brief narrative on why they selected those listings and how they meet their criteria.
Next, we will ask them to complete a deeper analysis of one of those potential deals. They will be asked to perform due diligence, including putting together their financial projections, business plan, and acquisition and negotiation strategy.
We want to see how they go about evaluating a deal.
They will be asked to explain their thought process behind choosing that business and substantiate why it is a good fit for them and how they can execute the deal. They will provide quantitative and qualitative analyses of their acquisition target, project investor returns, and outline the risks and opportunities of that acquisition.
The ability to identify and acquire strong businesses at a good price with investor returns in mind is crucial to being an EFC operator.
While an operator’s track record allows us to examine their past experience, the listing evaluation stage provides a framework for quantifying and comparing their future performance.
If the candidate successfully completes steps one to four, they will be invited to a final interview.
Step 5 – Final Interview and Selection
In this interview, we will provide feedback on their application performance and discuss their due diligence exercise. We will evaluate their bandwidth to take on the duties of an operator, discuss the operation timeline and next steps (fundraise, acquisition period), and clearly define the acquisition criteria that they will present to investors.
After the final interviews, we make a selection and send offers to the most suitable operators.
Successful applicants will be asked for a few additional verification items before proceeding, including proof of financials from their portfolio and their track record. Additionally, we will have them complete a background and credit check.
Operator Selection is Crucial to the Success of EFC
Although an operator may be qualified to raise funds with us, they may not be a fit for a given round based on the other operators we have selected. If they are not selected, we will provide candid feedback on their strengths and weaknesses and will be happy to consider them for a future round.
By Round 2, we have reached the final application stage with a very strong selection of candidates.
After evaluating their individual strengths and weaknesses and their fit into a diversified portfolio offered to investors, we make the final selection of a handful of candidates with expertise across different monetization types, acquisition criteria, and growth strategies.
Overall, we are looking for a recent and relevant track record of executing the exact strategy the operator wants to carry out. For example, if they would like to run FBA deals, they would need to have a track record of successfully executing those types of deals.
Many operators have bought and sold businesses with EF. For those candidates, we will already have a leg up on verifying their track record because oftentimes EF put together the P&L, vetted the operator’s businesses, and assisted in executing the deal.
If the operator hasn’t previously transacted with EF, then we will vet their track record of buying and selling businesses wherever they have worked in the industry and verify the numbers they have provided to us.
Think You Could Be a Successful Operator or Would Like to Invest?
We are already preparing for Round 3 and are accepting operator applications.
Across two rounds in 2021, we had over 220 investors invest $13,000,000+ to own fractional pieces of online businesses.
If you’d like to invest in Round 3, let us know here.