Search Funds are a misunderstood, and little known asset class that gives young, entrepreneurial, and hungry people the ability to accelerate their careers, ditch working for large corporations, and potentially shape an industry. I have some experience helping out one of these such investment vehicles, and thought it would be interesting to the masses to shed some light on this relatively unknown asset class.
Definition of a Search Fund
The clinical definition of a search fund is a small group of individuals who have secured a pool of capital in order to buy a company, and then become the senior management team of that company. For example, two guys out of Harvard Business School decide to forgo their offers at McKinsey, raise $10 million, and go find a services business in New Jersey that they acquire, and then run. This is the 10 second spiel on search funds, but there is so much more to it than that.
Essence of a Search Fund
To understand a search fund, it’s important to understand the type of people who get caught up in this type of venture. The typical searcher, if there is one, has a few years of investing experience (PE/VC), and most likely some sort of operational experience either as a consultant or as an actual manager in a corporation. They probably went to either Harvard of Stanford to get their MBA, and have made the decision to go out on their own instead of joining most of their classmates at Goldman/McKinsey/etc.
They have found a group of investors, typically 10-30 high net worth individuals who were former entrepreneurs, private equity investors, or searchers themselves, to give them a commitment. The investors commit to investing in a deal, if they like it, and also provide some operating capital for office space, internet, etc while the two entrepreneurs search for a suitable target.
Searchers usually work in groups of 2 as the job takes a lot of resilience and discipline – and going it alone can be, well, lonely. Between the two searchers, you’re looking at a few hundred thousand dollars in forfeited yearly income while they try to find a company that they could grow into an enterprise that would return considerably more than that.
In exchange for giving up the relatively cushy life at a larger firm, the searchers typically rent out a small room in a shared workspace in New York, Boston, or San Francisco.
Most of the time their day to day consists of hustling to find interesting investment opportunities. They cold call family businesses in Iowa, talk to business brokers, and try to find industry experts through LinkedIn that will give them free advice on tackling a “niche.”
The Niche Philosophy
Searches are industry driven. The goal is to find a nascent, but growing industry “niche” that is also target rich. If your radiologist tells you that he just started outsourcing his billing to a company with a call center in Florida, you might want to look into outsourced billing for radiologists. Say the industry is growing at 30% and is populated by unprofessionalized, small and sleepy companies. Well, you just found a great niche.
In practice, searchers go through niches quite quickly. Time is their most scarce resource and so if something isn’t growing fast, is dominated by a large player, or there just don’t seem to be any companies looking to sell, it’s killed. Sometimes niches are killed after a few days, sometimes after a few weeks. The typical searcher is looking at ~3 niches at any given time, while also evaluating more opportunistic targets as they come in through brokers, lawyers, and other networks.
Why Give Up My Job At McKinsey?
Earlier in the post I mentioned that searchers give up a lot of income they could have gotten at another job. Why would any rational human do such a thing?
For starters, most searchers are entrepreneurial at heart and like working for themselves, so that comes at a premium. Another key component is that searchers get a decent equity stake in the business that they buy, with their investor base getting the rest (unless current owners are rolling equity, but that is a more advanced topic and a discussion for another day). The portion of the equity can also be stepped up considerably if IRR targets are hit – these targets are typically around 30%.
Acquisition Profile
Searchers look for many things traditional investors look for in a company: recurring revenue streams, high margins, large markets, etc. But, there are a few things that are MOST relevant.
- Growth: Searchers get paid on the growth of the company they buy. Industry tailwinds are a huge plus.
- A platform: Search fund investors don’t want their searchers to start companies. They want them to find “platforms” – defined as firms with all of the infrastructure necessary to scale a business – and then grow said platform.
- Services/Operationally focused businesses: Most searchers do not have any sort of technology/biotech/other special skill set. Searchers are hard core operations guys who think about efficiency/hiring/sales/marketing/IT all day long and who can take a family owned, unprofessionalized business, and squeeze out margins while growing the company like crazy.
- Buying right: Searchers need to find a company they can buy at a rational multiple, and maybe even with the help of some debt and/or seller financing (again, a topic for another day). They are putting all of their eggs in one investment, and need to make sure they are protected!
- Management: This is the most important and most misunderstood of the criteria. Searchers are going to become the CEO/COO/CFO/Whatever and so the current owner either needs to be a manager looking to step down and work on a specific part of the business (sales and marketing, research, etc), or retire/move on altogether. Of course, finding a high growth company where management wants to walk away at a conservative price is a huge challenge!
The Outcomes
Several very successful companies have sprung out of searchers. Service Source, Asurion, and other, lesser known companies were all searches to begin with. Of course, there are also many search funds that don’t make it due to the challenges of finding the right company, at the right price, at the right time.
Please be on the lookout for a follow up post with some of the more advanced and specific details around search funds! Also, below there is a link to a nice research paper on search funds written by folks at Stanford University. Enjoy!
Search Funds-2009 Selected Observations FINAL – revised 7.21.10(2)
practical review. Also visit one of the greatest site which might be played slot via
pulsa. This page has received brand together with judi slot online playing rivals in Negara sendiri.
There tend to be many exciting promos if you ever join at
this moment.
Everything is very open with a very clear clarification of the issues.
It was really informative. Your site is very useful. Thanks for sharing!
I visited several websites however the audio quality for audio songs existing at this site is really
fabulous.
I blog often and I truly thank you for your information. Your article has truly peaked my interest.
I am going to take a note of your site and keep checking for new
information about once per week. I opted in for your RSS feed as well.
I am not sure where you are getting your information, but good topic.
I must spend some time finding out more or working out
more. Thank you for wonderful information I was on the lookout for this information for my
mission.
each time i used to read smaller articles or reviews that
as well clear their motive, and that is also happening with this article which I am reading
at this place.
Hey I am so grateful I found your web site,
I really found you by mistake, while I was looking on Google
for something else, Anyhow I am here now and would just like to say thanks
for a remarkable post and a all round entertaining blog (I also love the theme/design),
I don’t have time to read it all at the
minute but I have saved it and also added
in your RSS feeds, so when I have time I will be back to
read a lot more, Please do keep up the fantastic work.
Dieser Anspruch ergibt sich aus den Sozialgesetzbüchern V und XI.
Als technische Hilfsmittel kommen einerseits mobile Starr- oder Teleskoprampen oder feste, aufgelegte Rampen in Frage.
Zum andern sind fest im Gebäude installierte
Rollstuhlrampen oder elektrische Treppen- und Hublifte denkbar.
Hierbei ist die Pflegeversicherung der Leistungserbringer.
Bei solchen Rampen handelt es sich um Sachleistungen der gesetzlichen Krankenversicherung.
Damit Dir eine Rampe als Mobilitätshilfe bewilligt wird, musst Du eine Rezept einreichen. Sanitätshaus deshalb, weil die Rampe
den Vorgaben des Gesetzes für Medizinprodukte entsprechen muss.
Dadurch sollen Dein Schutz und die technische Sicherheit gewährleistet sein. Teilweise wird auch ein Kostenvoranschlag von einem Sanitätshaus verlangt.
In den meisten Fällen wirst Du dann eine Rampe aus den Lagerbeständen bekommen, die der Leistungsträger in seinem Hilfsmittelpool hat.
Ähnlich wie bei einem Krankenpflegebett oder einem Badewannenlift muss die Rampe später wieder
zurückgegeben werden, wenn sie nimmer gebraucht wird.
Wie kann ich Dir helfen? Mein Figurieren Ömer Bekar und ich bin der Autor und Gründer dieser Seite.
Gib es vielleicht ein spezielles Thema, worüber ich schreiben kann?
fascinating review. Additionally visit this excellent site to savor slot online pulsa.
This original website has received very good reputation out of slot pulsa gaming cricket fanatics in Dalam negri.
At this time there are actually plenty of lovely promos if you ever join currently.
Do you mind if I quote a few of your posts as long as I provide credit and sources back to
your blog? My website is in the exact same niche as
yours and my visitors would truly benefit from some of the information you present here.
Please let me know if this okay with you. Thank you!
Awesome issues here. I am very happy to look your post.
Thanks so much and I am having a look ahead to touch you.
Will you kindly drop me a mail?
Hey I am so glad I found your blog page, I really found you by accident,
while I was searching on Aol for something else, Regardless I am here now and would just like to say
many thanks for a tremendous post and a all round interesting blog
(I also love the theme/design), I don’t have time to browse it all at the minute but I have bookmarked it and
also added in your RSS feeds, so when I have time I will be back to read a great deal more, Please do keep up the awesome work.
Hello, yup this article is truly fastidious and I have
learned lot of things from it about blogging. thanks.
With havin so much content do you ever run into any problems of plagorism or copyright violation? My
blog has a lot of unique content I’ve either authored
myself or outsourced but it seems a lot of it is popping it up all over the internet without my agreement.
Do you know any ways to help reduce content from being ripped
off? I’d really appreciate it.
This site truly has all of the information and facts I needed about this subject and didn’t know who to ask.
Howdy I am so thrilled I found your blog page, I really found you by error,
while I was looking on Yahoo for something else, Nonetheless I am
here now and would just like to say many
thanks for a tremendous post and a all round enjoyable blog
(I also love the theme/design), I don’t have time to browse
it all at the minute but I have bookmarked it and
also included your RSS feeds, so when I have time I will be back to read much more,
Please do keep up the fantastic work.
An impressive share! I have just forwarded this onto a coworker who was doing a
little homework on this. And he in fact ordered me breakfast because I found it for him…
lol. So let me reword this…. Thanks for the
meal!! But yeah, thanks for spending the time to talk about this matter here on your blog.
Have you ever thought about publishing an ebook or guest authoring on other websites?
I have a blog based on the same topics you discuss and would love
to have you share some stories/information. I know my audience would value your work.
If you’re even remotely interested, feel free to shoot
me an e-mail.
exciting review. Furthermore visit desired site to discover slot.
These web site has received brand out of agen slot pulsa casino players in Dalam negeri.
There are many advisable promos should you join at present.
This is my first time pay a quick visit at
here and i am in fact happy to read all at single place.
Thanks for a marvelous posting! I certainly enjoyed reading
it, you might be a great author. I will be sure to bookmark your blog and
definitely will come back later on. I want to encourage you continue your great posts, have a nice
afternoon!
Very energetic blog, I loved that bit. Will
there be a part 2?
Hi there it’s me, I am also visiting this web site on a regular basis, this site is actually good and
the visitors are actually sharing nice thoughts.
Thanks in support of sharing such a good thought,
piece of writing is nice, thats why i have read it fully
I like the valuable information you supply to your articles.
I’ll bookmark your blog and check once more here frequently.
I’m quite sure I will be told many new stuff proper
right here! Best of luck for the following!
Hello, i think that i saw you visited my website so i came to
“return the favorâ€.I’m attempting to find things to
enhance my web site!I suppose its ok to use some of your ideas!!
I think that what you posted made a great deal of sense. But,
consider this, what if you were to create a awesome headline?
I am not suggesting your information isn’t solid, but suppose you added something that makes people want more?
I mean The Search Fund Model – Phil Strazzulla's
Blog is a little boring. You ought to look at Yahoo’s front page and watch how they create news titles
to grab viewers to open the links. You might add a related video or a related pic or two to get readers
excited about everything’ve got to say. Just my opinion, it would make your posts a little livelier.
I visited multiple web pages except the audio feature
for audio songs current at this web site is genuinely fabulous.
After going over a handful of the articles on your web site, I
really like your way of writing a blog. I saved as a favorite it to my
bookmark website list and will be checking back soon. Please check out my website too and let
me know how you feel.
This is a really good tip particularly to those fresh to the blogosphere.
Simple but very accurate information… Appreciate your sharing this one.
A must read article!
And Jacqueline began on March 18th and played for
5 straight days.
my page: 메리트카지노 고객센터
great points altogether, you just received a new reader.
What would you suggest about your submit that you made a
few days ago? Any certain?
Why users still use to read news papers when in this technological globe everything is presented on web?
Excellent blog you have got here.. It’s hard to find excellent writing
like yours nowadays. I honestly appreciate individuals like you!
Take care!!
Da warten u.a. Saunen und einem Indoor- und Outdoorpool.
Außerdem wurde es bereits mehrfach zum besten Skigebiet der Welt gekürt!
Direkt bei den Liften des Skigebiets Obergurgl – Hochgurgl steht das Top bewertete 4°S The Crystal mit
seinem fantastischen 2.000 m² Spa-Bereich auf 2 Etagen. Die Gründe liegen klar auf der Hand: Neben den modernsten Aufstiegsanlagen und
den vielen traditionellen Hütten zum Einkehren findet ihr hier… Servus
Piraten! Interessiert an einen luxuriösen Trip ganz ans Ende des Ötztals?
Dahinter stehen zwei bekannte Persönlichkeiten, als da sind Hermann Maier & Rainer Schönfelder, welche mit dieser neuen Hotelmarke
(ursprünglicher Name adeo) Skiurlaub für jedermann erschwinglich
machen, was ihnen mit ihren Hotelprojekten absolut gut… Mit fast
300 Pistenkilometern und knapp 100 Liftanlagen gehört die SkiWelt Wilder Kaiser-Brixental zu den größten und modernsten Skigebieten Österreichs und der Welt.
Auch zum diesjährigen Saisonfinale Ende März bekommt
ihr noch Termine. Falls ihr Heuer nicht zum Rennen dort wart, macht das nichts, denn Snowtrex hat bereits die Buchungstermine für das Künftige Jahr drin, bei denen ihr sehr viele sparen könnt.
Ahoi Piraten! Matthias Mayer heisst der diesjährige Sieger des Hahnenkammrennens auf der Kitzbühler “Streif”.
Wem die 110 km Piste auf einer Höhe zwischen…
Thanks for sharing your info. I truly appreciate your efforts and I will be waiting for your next write ups thank you once
again.
It’s remarkable in support of me to have a site, which is valuable
in favor of my know-how. thanks admin
Hello, just wanted to say, I enjoyed this article.
It was funny. Keep on posting!
It’s awesome in support of me to have a web page, which is valuable
for my knowledge. thanks admin
After checking out a number of the blog posts on your web site, I
seriously appreciate your technique of blogging.
I saved as a favorite it to my bookmark website list and will be checking
back soon. Please check out my website as well and tell me
what you think.
Wenn du in diesem Land eine TUI-Reise mit Abreise bis 30.04.2021 buchst, erhältst
du automatisch und kostenlos den Reiseschutz “Covid Protect” zu deiner Buchung dazu.
Deswegen rate ich dir dazu, die aktuellen Nachrichten zu verfolgen und dich bei deinem Außenministerium über
schlau zu schaffen. Der Coronavirus hat die ganze
Tourismusbranche auf den Kopf gestellt – neue Konzepte und Sicherheitsmaßnahmen mussten entwickelt
werden um Reisen weitestmöglich weiterhin zu ermöglichen. Prima!
Was ich dir jetzt noch ans Herz lege: eine Reiseversicherung mit
Coronaschutz. Buchst du deine Reisen stets online? Für andere Reiseveranstalter kannst du eine Reiseversicherung
inklusive Corona Reiseschutz oder eine Reisestornoversicherung der Allianz Travel zubuchen –
online im letzten Buchungsschritt oder in unseren Reisebüros.
Auszufüllende Dokumente, Quarantänebestimmungen und Rückreise Bedingungen können verwirrend sein.Um
dir durch diesen Informationsdschungel zu helfen, haben wir
dir eine Übersicht der geltenden Reisebestimmungen der beliebtesten Urlaubsländer zusammengestellt,
welche wir regelmäßig aktualisieren. Auch 2021 können sich
Einreisebestimmungen laufend ändern. Die genauen Preise sind dabei
abhängig von deiner Reise. Klar, Onlinebuchungen sind bequem von zuhause aus zu
erledigen, doch der Kundenservice in Restplatzbörse Reisebüro Filialen ist unschlagbar.
Erfahre hier mehr über die Vorteile, Unterschiede und Preise der Reiseversicherungen.
Hi I am so thrilled I found your blog page, I really found
you by error, while I was looking on Google for something else, Regardless I am here now
and would just like to say kudos for a tremendous post and a all round enjoyable blog (I
also love the theme/design), I don’t have time to
browse it all at the moment but I have saved it and also included your RSS feeds, so when I
have time I will be back to read a lot more, Please do keep up the superb work.
Does your blog have a contact page? I’m having trouble
locating it but, I’d like to shoot you an e-mail.
I’ve got some recommendations for your blog you might be interested in hearing.
Either way, great blog and I look forward to seeing it improve over time.
Good day! Would you mind if I share your blog with my facebook group?
There’s a lot of people that I think would really enjoy your
content. Please let me know. Cheers
Hey are using WordPress for your site platform? I’m new to the blog world but I’m
trying to get started and create my own. Do you require any html coding expertise
to make your own blog? Any help would be greatly appreciated!
Currently it seems like BlogEngine is the preferred
blogging platform out there right now. (from what I’ve read) Is that what
you are using on your blog?
I’m really enjoying the theme/design of your website.
Do you ever run into any internet browser
compatibility issues? A handful of my blog readers have complained
about my site not working correctly in Explorer but looks great in Chrome.
Do you have any advice to help fix this issue?
I’m not that much of a internet reader to be honest but your sites really nice, keep it up!
I’ll go ahead and bookmark your website to come back in the
future. All the best
You’ve made some really good points there. I looked on the net for
more info about the issue and found most people will go along with your views on this site.
I was able to find good information from your articles.