Search Funds: An Alternative Path to Entrepreneurship

February 28, 2024 | 81 mins

A search fund is an investment vehicle in which the entrepreneur (or team) initially raises a small pool of capital from several investors to fund a search (of up to 24 months) for a suitable small business to acquire. Typically, these are usually a family business without a clear succession plan and/or in need of fresh capital and leadership to take the company to the next level. Upon identifying the best opportunity, the search fund entrepreneur returns to the original group of investors to raise additional capital to acquire the business and subsequently lead it as the CEO. Unlike traditional private equity, the search fund entrepreneur focuses all efforts on operating this single business, working with its employees, customers, and suppliers to create organic growth and improve the efficiency of internal operations. The higher the return for the investors, the greater the ownership the search fund entrepreneur earns in the shares of the acquired company, aligning incentives between investors and operators better than traditional venture capital or private equity.

The conversation among "searchers" and "funders" within this "entrepreneurship through acquisition (ETA)" model will explore the paths each navigated to launch their own search funds, raise capital, acquire, and subsequently operate their companies as CEOs.

Do you have what it takes to find a diamond in the rough?

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