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)
Pretty section of content. I just stumbled upon your site and in accession capital to assert that
I acquire in fact enjoyed account your blog posts. Anyway I will be subscribing to your augment and even I achievement you access consistently fast.
You could certainly see your skills within the article you write.
The sector hopes for even more passionate
writers like you who are not afraid to say how they believe.
At all times go after your heart.
Excellent blog you have here.. It’s hard to find high-quality writing like yours nowadays.
I really appreciate people like you! Take care!!
Awesome! Its truly remarkable paragraph, I have got much clear idea on the topic of from
this article.
I really like your blog.. very nice colors & theme.
Did you design this website yourself or did you hire someone to do it for you?
Plz answer back as I’m looking to construct my own blog and would like to know
where u got this from. kudos
I know this web site gives quality dependent content and additional material, is there any other web site which presents
these kinds of things in quality?
I absolutely love your site.. Pleasant colors & theme.
Did you develop this website yourself? Please reply back as I’m
attempting to create my own blog and want to find out where you got this from or exactly
what the theme is named. Kudos!
Wow, wonderful blog layout! How long have you been blogging
for? you made blogging look easy. The overall look of your web site is great, as well as the content!
I think the admin of this site is genuinely working hard in support of
his site, as here every stuff is quality based material.
hello there and thank you for your info
– I have definitely picked up anything new from right here.
I did however expertise some technical points using this site,
since I experienced to reload the web site a lot of times previous to I could get it to load properly.
I had been wondering if your web hosting is OK?
Not that I’m complaining, but slow loading instances times
will often affect your placement in google and could damage your high
quality score if advertising and marketing with Adwords.
Well I’m adding this RSS to my e-mail and could look out for a
lot more of your respective interesting content. Make sure
you update this again soon.
Kanzlerin Volksvertreter sagte am Donnerstag im Bundestag, sie werde
sich um eine Abstimmung mit den anderen Staaten bemühen. Vielerorts sind Geschäfte und Restaurants weiterhin geöffnet.
Doch die Haltung Deutschlands stößt auf deutlichen Widerstand aus Österreich und der Schweiz.
Die Alpenländer ringen weiter um eine gemeinsame Linie, ob im Winterurlaub die Skigebiete öffnen sollen. Sie will wegen der Pandemie alle Skigebiete europäisch schließen. Besonders in Deutschland sind Politik und Gesundheitsexperten skeptisch.
Die Regierung in Bern lehnt eine Schließung der Skigebiete ab.
Das Land versucht, die Pandemie mit weniger einschneidenden Maßnahmen besiegbar als andere Länder.
Frank Ulrich Montgomery, der Vorstandsvorsitzende des Weltärztebundes, mahnte zu strengen Regeln für alle Reiserückkehrer.
Der Zwist unter Europas Regierungen, ob der Wintersport in der Pandemie stattfinden kann,
dauert an. Der Vorstandsvorsitzende des Weltärztebundes, Montgomery, pocht auf strenge Quarantäne für Rückkehrer.
Tatsächlich favorisiert die Bundesregierung wesentlich
strengere Auflagen. Corona-Pandemie Quarantäne für Skiurlauber?
Österreich verlangt bei einem Verbot Kompensation.
really interesting review. On top of that visit
this sort of site which might be competed slot via pulsa.
Amazing website has received attractiveness along with slot
online casino people in Dalam negri. At this time there
are generally lots of exciting promos by means of chance a person join at this time.
Bei 20 Prozent muss die Hilfsperson stark sein. Bei der Auswahl
der passenden Steigung spielt also das individuelle Nutzungsverhalten eine
Rolle. Wird die Rampe dagegen im öffentlichen Bereich genutzt, ist eine Steigung von maximal sechs Prozent zwingend erforderlich.
Wer zahlt für die Rampe? Im Pflegefall können Betroffene von verschiedenen Einrichtungen finanzielle Unterstützung erhalten. Die finanzielle
Unterstützung kann über einen Zuschuss, über eine vollständige Kostenübernahme oder über ein zinsgünstiges Darlehen erfolgen. Entsprechend Ursache
kommt ein bestimmter Leistungsträger in Frage.
Das hängt von der konkreten Situation ab. Dann sind
die Versicherungen erster Ansprechpartner. Handelt es sich um einen akuten Hilfsmittelbedarf infolge Alters- oder Unfallfolgen? Dafür bietet zum Beispiel die KfW Förderbank
zinsgünstige Darlehen für barrierefreies Bauen. Der Staat unterstützt jedoch auch die Vorsorge.
Denn ein Pflegefall ausgeschlossen immer längerfristig abzusehen. Wer schon früh sein Wohnumfeld baulich anpasst, um auch fürs Alter vorzusorgen, wird von welcher neuen Situation bei Eintritt
einer körperlichen Einschränkung nicht unvorbereitet überrascht.
I’ve been surfing on-line greater than three hours nowadays, yet I never
discovered any fascinating article like yours. It is pretty worth sufficient for me.
In my view, if all webmasters and bloggers made good content
material as you did, the web will be a lot more useful than ever
before.
critical review. Additionally visit the exact site which might be
played slot pulsa. The following site has received name along with
judi slot online on line casino competitors in Negara sendiri.
There will be a few exciting promos just in case join right now.
If some one needs to be updated with most recent technologies
therefore he must be pay a visit this website and be up
to date everyday.
Very nice article, totally what I needed.
I’m gone to tell my little brother, that he should also pay a quick visit this webpage on regular basis to obtain updated from newest information.
When some one searches for his required thing, thus he/she
wants to be available that in detail, therefore that thing is maintained over here.
Hey there! Quick question that’s entirely off topic.
Do you know how to make your site mobile friendly? My site looks
weird when browsing from my apple iphone. I’m trying to find
a theme or plugin that might be able to fix this problem.
If you have any suggestions, please share.
Thanks!
Hey there! This is my first visit to your blog!
We are a team of volunteers and starting a new initiative in a
community in the same niche. Your blog provided us useful information to work on. You have done a
outstanding job!
What’s up, I desire to subscribe for this
weblog to get most up-to-date updates, therefore where
can i do it please help out.
I am truly pleased to glance at this weblog posts which
carries lots of valuable data, thanks for providing such
statistics.
Wer im Urlaub oder im Büro nicht nur Fotos sehen möchte, die
der Saugroboter während seiner Arbeit macht, sondern dieses Gerät auch mit allen seinen Funktionen steuern möchte, für den ist ein Saugroboter mit
einer App-Fernsteuerung genau das richtige. Im Gegensatz zur klassischen Fernbedienung, über die heutzutage praktisch jeder
Saugroboter verfügt, sind Geräte mit einer App-Fernsteuerung erst zunehmend populär werden. So sind sie z.B.
Allerdings sind solche Geräte meist erheblich vielseitiger als
ihre klassischen Konkurrenten ohne App-Fernsteuerung.
Lage, den Wohnraum mit einer integrierten Kamera mit Bewegungssensor zu überwachen, sie können Mails mit
Fotos an den Besitzer schicken und gezielt in Wohnräumen nachschauen, ob das Licht (oder z.B.
Standardmäßig können Saugroboter auch völlig ohne Licht arbeiten. Zu
beachten ist aber: Staubsaugerroboter mit Kamera-Navigation finden sich in abgedunkelten Räumen nimmer zurecht,
ihre Navigation versagt hier völlig. Dagegen funktioniert die Steuerung über virtuelle Wände bzw.
Leuchttürme auch in völlig dunklen Räumen ausgezeichnet,
da hier mit unsichtbaren Infrarotstrahlen gearbeitet wird.
Hmm is anyone else encountering problems with the images on this blog loading?
I’m trying to determine if its a problem on my end or if it’s the
blog. Any suggestions would be greatly appreciated.
Hi, I do think this is a great site. I stumbledupon it ;
) I’m going to return once again since I book-marked it.
Money and freedom is the greatest way to change,
may you be rich and continue to help others.
Hello, after reading this awesome article i am too delighted to share my experience here
with friends.
Wow that was odd. I just wrote an extremely long comment but after I clicked submit my comment didn’t appear.
Grrrr… well I’m not writing all that over again. Anyway, just
wanted to say wonderful blog!
Your mode of telling everything in this piece of writing is truly good, every one be capable of easily be aware of it, Thanks a lot.
Bei 20 Prozent muss die Hilfsperson stark sein. Bei der Auswahl
der passenden Steigung spielt also das individuelle Nutzungsverhalten eine Rolle.
Wird die Rampe dagegen im öffentlichen Bereich genutzt, ist eine Steigung von maximal sechs Prozent zwingend erforderlich.
Wer zahlt für die Rampe? Im Pflegefall können Betroffene von verschiedenen Einrichtungen finanzielle Unterstützung erhalten. Die finanzielle Unterstützung kann über einen Zuschuss,
über eine vollständige Kostenübernahme oder über ein zinsgünstiges Darlehen erfolgen. Getreu Ursache kommt ein bestimmter Leistungsträger in Frage.
Das hängt von der konkreten Situation ab. Dann sind
die Versicherungen erster Ansprechpartner. Handelt es sich um einen akuten Hilfsmittelbedarf aufgrund Alters- oder
Unfallfolgen? Dafür bietet u. a. die KfW Förderbank zinsgünstige Darlehen für
barrierefreies Bauen. Der Staat unterstützt jedoch auch die Vorsorge.
Denn ein Pflegefall mitnichten immer längerfristig abzusehen. Wer schon früh sein Wohnumfeld baulich anpasst, um auch fürt Alter vorzusorgen,
wird von der neuen Situation bei Eintritt einer körperlichen Einschränkung nicht unvorbereitet überrascht.
hello there and thank you for your information – I’ve certainly picked up
something new from right here. I did however expertise
a few technical issues using this website, as I experienced to reload the web site many times previous
to I could get it to load properly. I had been wondering if your
web host is OK? Not that I’m complaining,
but sluggish loading instances times will very frequently affect your
placement in google and can damage your high-quality score if ads and marketing with
Adwords. Anyway I’m adding this RSS to my email and can look
out for a lot more of your respective exciting content. Ensure that you update this again very
soon.
Hi i am kavin, its my first time to commenting anyplace, when i read this piece of writing i thought i could also make comment due to this good post.
Generally I do not learn article on blogs, but I would like to say that this write-up very compelled
me to check out and do so! Your writing taste has been amazed me.
Thank you, quite nice article.
Wow! In the end I got a webpage from where I be capable of truly get helpful data regarding my study and knowledge.
It’s great that you are getting ideas from this article as well as from our dialogue made at this time.
I don’t even know how I ended up here, but I thought this post was great.
I don’t know who you are but certainly you’re going to a
famous blogger if you aren’t already 😉 Cheers!
It is perfect time to make a few plans for the long run and
it’s time to be happy. I’ve learn this publish and if I may I desire to suggest you some attention-grabbing issues or advice.
Maybe you could write next articles regarding this article.
I wish to read even more things approximately it!
My programmer is trying to convince me to move to .net from PHP.
I have always disliked the idea because of the costs. But he’s
tryiong none the less. I’ve been using Movable-type on several websites for about a year and
am worried about switching to another platform. I have heard very good things about blogengine.net.
Is there a way I can import all my wordpress posts into it?
Any help would be greatly appreciated!
I used to be able to find good advice from your blog articles.
Thanks a bunch for sharing this with all people you really realize what you are talking approximately!
Bookmarked. Please additionally consult with my site =).
We can have a hyperlink alternate agreement among
us
Wer die Rampe nur vorübergehend benötigt oder vor der
Anschaffung gern unterschiedliche Rampentypen austesten möchte, kann sich
bei verschiedenen Anbietern eine Rollstuhlrampe mieten.
Nach Typ, Material und Größe der Rollstuhlrampe können die Preise stark
variieren. Es lohnt sich, vorm Kauf bei verschiedenen Herstellern Kostenvoranschläge einzuholen und diese dann
sorgfältig zu prüfen und zu vergleichen. Wer eine
Rollstuhlrampe gebraucht kaufen möchte, sollte sicherstellen, dass die Maße der gebrauchten Rampe zu den Gegebenheiten der eigenen Situation passen. Ein Kostenvergleich
ist auch dann sinnvoll, wenn man lediglich eine Rollstuhlrampe
leihen möchte. Angebote finden sich vielfach auf Online-Portalen für private Kleinanzeigen. Allerdings besteht auf die Rampen von privaten Verkäufern keine Garantie mehr.
Zudem ist das Risiko höher, beschädigte Ware zu erhalten. Je nach Hersteller, Alter und Zustand der Rampe kann das Einsparungen von bis in fünf
von zehn fällen bedeuten. Die Kosten einer Rollstuhlrampe variieren getreu Länge, Materialien und Zubehör, exemplarisch einem
Geländer. Kurze Rampen aus Aluminium, mit denen ein einzelner
Stufe überwunden werden muss, gibt es ab circa 100 Euro haben wir da.
Nice blog here! Also your web site loads up very fast!
What web host are you using? Can I get your affiliate link to your host?
I wish my web site loaded up as quickly as yours lol
I really love your website.. Great colors & theme. Did you build this site yourself?
Please reply back as I’m attempting to create my very own blog and would love to
know where you got this from or just what the theme
is named. Many thanks!
Hi my family member! I wish to say that this post is awesome, great
written and include approximately all important infos.
I would like to peer more posts like this .
excellent issues altogether, you simply gained a new reader.
What would you recommend about your post that you just made a
few days in the past? Any sure?
Hi there to all, the contents present at this
web page are really amazing for people experience,
well, keep up the nice work fellows.
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! Heiß auf 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 apodiktisch 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 die kommende Zeit Jahr drin, bei denen ihr richtig was
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…
My coder is trying to convince me to move to .net
from PHP. I have always disliked the idea because of the
costs. But he’s tryiong none the less. I’ve been using WordPress on a variety of websites for about a year
and am nervous about switching to another platform. I have heard good things about blogengine.net.
Is there a way I can import all my wordpress posts into it?
Any help would be greatly appreciated!
Ahaa, its nice conversation about this article here at this website, I have read all that,
so now me also commenting here.
always i used to read smaller posts which also clear their motive, and that is also happening with this article which I am reading here.