SearchFund.org
Entrepreneurship through Acquisition
Funded, Unfunded & Search Funds
BUYING A BUSINESS "MODEL"
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START HERE: Is buying a small business right for me?
Search Funds broadly are vehicles for entrepreneurs to raise funds from investors interested in making private equity investments [In many instances referred to as "Fundless Sponsors" or "Unfunded Buyers" since acquisition equity & debt capital is indicated but not firmly committed].
- In the first stageof a "classic" or "traditional" search, a smallgroup of qualified investors back solo or partneredoperating manager(s) to search for a target company to acquire. A fund generally has up to 2 years and may find a target acquisition company [GSB: 75% acquire].Investors are able to invest a pro-rata share in the target company, subject to their individualliking.Manyentrepreneurs deviate from the "classic" model by (1) teaming up with a single investor groupor (2)byself-funding the searchstage & approaching various investors when a target company is identified to acquire. More on the Self-Funded search process.
- In the second stage, the operating manager(s) of the Search Fund take operating roles in the acquired company—CEO, President and the like.
For more details, please see our list of relevant resources.
STATS
Search funds typically target companies in the $5-30m price range, $1-5m EBITDA range, $2-30m revenue range, requiring $2-10m of equity capital, in (1) fragmented industries, with (2) sustainable market positions, (3) historically stable cash flows, and (4) long-term opportunities for growth and improvement. Service and light manufacturing companies outside high tech industries are popular targets. Often these companies are under-managed prior to the acquisition.
Many are started by entrepreneurs with limited operational experience and possibly no direct experience in the target industry. The goal of the investor is to place promising, motivated managers in an environment with a high probability for success given the oversight and experience of the investors themselves.
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Connecting small business legacies with qualified,independent, & funded entrepreneurs to gradually assume operations & ownership.
$10T
Baby Boomer Company Value toTurnover
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Are you considering buying a small company?
Ask yourself some simple questions to see if this is a good career path for you.
There are currently over 241 entrepreneurs actively seeking to acquire companies around the world and across nearly all industries. In 2022, over 50 new search funds were formed
Many of these individuals come from HBS, Stanford GSB, Chicago Booth, Columbia and UPenn Wharton with on average 7 years of work experience. With the help of their investors, they are prepared to search, acquire, operate and strengthen a small business legacy. In context to the greater economy, small businesses are a vital component and often account for more than 50% of both GDP growth and job creation in many countries (SBE Council).
For Small Business Owners
Are you a small business owner or represent small businesses and want to speak with entrepreneurs seeking to acquire and operate companies?
Search Fund Investors
Search fund equity investors typically consist of high net worth individuals, private equity firms as well as family offices. Over the past 10 years, 75% of search fund investment capital has come from the top 25% of investors. There are some regulatory compliance complications with those that are actively employed in public financial markets, so many investors tend to be private market direct investors or indirectly through small institutional fund managers. In many instances, search phase and acquisition capital can be self-funded by the entrepreneur in order to obtain more favorable ownership economics. Below is a list of several search fund investor platforms. For additional inquiries, please email info@searchfund.org
Prominent Investor List
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Accelerators
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2020 Search Fund - Online Course
Join the wait-list for this 5-week online course tailored specifically for individuals seeking to acquire and operate a small company.
Inquiries
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For Entrepreneurs
Many search fund entrepreneurs don't only get to manage their own company, they often make over $10 million upon exit. Are you considering a search fund, preparing a PPM and/or launching soon?
"Self-Funded" Searches
Perhaps the most common and fastest growing path to owning a small company.
Capability, Capital & Commitment
In this informal model, entrepreneurs take on the costs and risk of searching for a company to buy. This enables the entrepreneur to keep a larger part of the ownership upon finding a company to acquire (Often retaining 50-100% of the ownership of the company). These entrepreneurs forego the need for a large pool of investor/mentors and rely on personal experience, capability and informal mentorship in their search, closing and operating decisions. This approach is much less standardized and the investor base is less conforming than "classic" search fund investors. Entrepreneurs generally buy smaller companies ($500k to $2.5m EBITDA) and finance their acquisition with personal equity (0-30%), investor equity (10-35%), seller note (10-35%) and senior bank debt (30-60%). There is a growing number of benchmarks for these type of EtA opportunities, yet no strong central resource for data. For more information about this model, please reach out: info@searchfund.org
Get Paid to Search
Found a seller that is ready to sell, but not a fit for you? We can help you get paid to search. Inquire here:
Check out ourlatest updates!
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EtA News
Email info@searchfund.org with any Search Funds related news or announcements.
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Are you considering buying a small company?
Ask yourself some simple questions to see if this is a good career path for you.
Resources
Books (Start Here!):
HBR Guide to Buying a Small Business
Launching a Fund:
Sample PPM [Traditional Search] - Please sign-in as a Member for free access to a Sample PPM
Research:
Chicago Booth - Evolution of EtA
Stanford GSB - Search Funds 2020 [Traditional Search Funds]
Stanford GSB - A Primer on Search Funds
Stanford GSB - Search Funds-2016: Selected Observations
Stanford GSB - Best Practices for the Search Phase
Investors:
Equity Investors - Please sign-in as a Member for free access to the investor list
SBA 7(a) Loans & SBA Searcher Use Example
99 Most Active SBA 7(a) Lenders
Searching Tools:
Deal Platfoms: Equire.co & MergerNetwork
Proprietary Tools: MarketingStack, Avention, Hoovers (D&B)& InfoUSA
Other: BizEx ValuationTool, Valuation Multiples, SBIA Lower Middle Market Investment Insights & ACG Events
Others:
2021 Search Fund - Online Course
Join the wait-list for this 5-week online course tailored specifically for individuals seeking to acquire and operate a small company.
The mission of the SearchFund.org website is to act as an educational resource for entrepreneurs & investors.
This .org site is a sensibly curated project for the greater search fund community. If you would like to make any additions or corrections, please submit an inquiry. The site is independently administered by Thomas Malloy.
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