Search Funds Recap

Written by
Mai Kasemsawade '26
April 4, 2024

On February 28, a lively crowd gathered for yet another exciting TigerTalks panel discussion,  “Search Fund: An Alternative Path to Entrepreneurship.” This was part one of a two-day event hosted by Princeton Entrepreneurship Council in sponsorship with West End Labs at its NYC venue for alumni. A group of students met with two of the panelists the following day in Princeton at Bendheim House on campus.

The panel featured four Princeton alumni in the search fund industry. The “searchers” on the panel  featured Winston Smith ‘07, CEO of Bridge, an InsureTech company; Chris Sykes ‘11, CEO of Swoogo, an online event management platform; and Nicolás Lulli ‘13, co-CEO of Polysistemas, a record information management business based in Peru. On the investor side, the panel featured Cecilia Lulli ‘15, VP of Investor Relations and Business Development at Relay Investments. The discussion was moderated by Don Seitz ‘79, the Associate Director of Alumni Engagement at PEC. Panelists gave illuminating insights into the emerging industry, which holds potential as an alternative to entrepreneurship for aspiring entrepreneurs seeking unique business experience and ownership.

A search fund is a model in which one or two entrepreneurs raise capital from a pool of investors to search for and acquire a privately run company, operate it as CEO or CEOs, then exit over the medium to long term. The entire timeline may span up to 10 years in total, with 6 months in initial fundraising (to finance the search), 12-24 months conducting the search and negotiating and acquiring the business, and 4-7 years of business management. For more information about this “entrepreneurship-through-acquisition” model, please see this article.

This model, which has received widespread popularity in recent years, is very flexible and collaborative in nature. All panelists echoed that the search fund model is a very self-guided process, wherein the entrepreneur works at their own pace and can claim ownership over the generated success. Furthermore, search funds may prove to be a more attractive model to sellers than private equity as the model allows for more “creative ways to close the deal,” such as seller financing or seller equity in addition to the traditional transaction terms.

Moreover, searchers cultivate a wide range of valuable skills as they become engaged in various activities throughout the process, from developing a network of relationships, conducting in-depth due diligence, presenting pitches, negotiating the acquisition, and managing the acquired business. Nicolas Lulli, who spoke about the collaborative environment of the search fund industry, and summarizes the model’s advantages as “the unique way to cultivate comprehensive professional experience, especially for a young entrepreneur.”

When asked about the fundraising process, Chris Sykes noted that the process is relatively easy as the search fund is collaborative and “has a growing vibrant network of investors” to which the entrepreneur can connect. Lulli, who conducted search in Peru and the Andean area, gave an interesting insight of challenges in the industry abroad compared to the environment in the US. Fundraising was an “uphill challenge” as search funds are a relatively new model and more exposed to American investors. Therefore it is difficult to convince local investors to get on board. However, he noted that in recent years search funds have expanded internationally, especially in Europe and Latin America. Lulli also pointed out that conducting a search in Peru is drawn from networks of personal contacts, whereas searching in the US is done mostly through cold emails and call arrangements. While there are differences in the approach, the search fund model similarly allows for flexibility and ownership for entrepreneurs to start their own ventures.

The search fund community is not limited to searchers with finance background, but comprises searchers from various professional backgrounds. Winston Smith, for example, came from a corporate background specializing in insurance. He noted that the network of support with investors can fill the required skill sets and industry experience that entrepreneurs are not specialized in, as he gave the example of reaching out for assistance in assembling a cap table and advice on terms for the deal making process. In all cases, communication is crucial for both the entrepreneur and the investors. Cecilia Lulli echoes investors’ expectations of communications from searchers. Investors, like Relay Capital, provide assistance as needed to searchers, and frequent check-ins are key to communicating needs to ensure success in cooperation in the long run.

Reflecting on their current business operation stage, the panelists agree that the keys to success in management is to choose an industry that you can succeed in and to create a streamlined process to ensure management efficiency. Sykes, for example, is passionate about event planning and determined Swoogo as the perfect match in his search process. Similarly, Smith came from the insurance background and is currently running Bridge, an InsureTech company. Additionally, Lulli suggested that understanding macro trends is crucial to create the recipe for a successful business search. His team identified the trend in Peru that foreign businesses are increasingly outsourcing operations and thus acquired Polysistemas, a record information management business which caters to the B2B customers in Peru.

Panelists were also optimistic about the growing diversity in the search fund sector. The recent study by the Stanford Graduate Business School in 2022 reported an increase in women-launched search funds from 2020-2021. Nicolás and Cecilia Lulli also highlighted “the effort to build a more inclusive search ecosystem,” seen in emerging networks for searchers of different identities and backgrounds.

On February 29, Lulli and Sykes were joined by aspiring Princeton students from backgrounds ranging from politics to finance.The panelists noted that the Princeton ecosystem also helped them foster a systemic learning skill that gave them an advantage in entering into such a new field such as search funds. Lulli, for example, came from a Politics and consulting background. Even without an MBA degree, Lulli sought out search fund-related opportunities and learned from first hand experiences and resources. 

The February 28th event in NYC was recorded and is available for viewing here.