Making money from a search fund

The way Coley Andrews sees it, there are two breeds of entrepreneurs. Others care less about the kind of product or service; but instead love the idea of acquiring an existing small business and growing it to its full potential. Andrews and his fellow investors like to put their money behind the second type. Their strategy, known as investing in small-cap leveraged buyouts via the search fund model, provides financial support and guidance to promising recent MBA graduates looking to buy and operate a single small business. Post-acquisition, the search fund entrepreneur becomes the new CEO. Andrews cofounded his own Boston-based private equity firm, Pacific Lake Partnersshortly after graduating from Stanford Graduate School of Business into focus exclusively on investing in search fund entrepreneurs and the companies they acquire. Search fund entrepreneurs also have to be comfortable with uncertainty, since the company they end up buying could be anything from a printing business to a wireless service provider. Acquisition entrepreneurs must be resourceful and fully committed to the enterprise. But the most important thing Andrews looks for in a new CEO is a willingness to listen. Andrews advises his CEOs to settle in and avoid changing too much at their new companies in the first year. At that point, the entrepreneur will have a much improved perspective on what changes to make and the direction to take the company. Twenty years ago there were just two or three new forming search funds per year; today there are over 50 active searches ongoing.

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A record 17 companies were acquired by search fund entrepreneurs in , according to the study. Though search funds are a niche investment model to be sure and these are small numbers, they represent significant growth. As the number of search funds has increased, alternatives to the model have emerged. Search fund accelerators typically recruit a number of searchers each year, giving each member of the cohort the opportunity to share resources as well as providing general education and advising services. Each year, Broadtree brings on around six searchers to join the team. The firm currently has 10 searchers on board. Slenzak acquired a Charleston-based healthcare technology company, Implementing Technologies, via a search fund in and successfully exited the company in , the same year he founded Broadtree. I had to recreate the wheel — create my own CRM system, develop my own list of contacts and targets, contact people my colleagues had already contacted who were not useful, make the mistakes my friends had already made.

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At the same time, Slenzak found other searchers — who soon became his friends — to be highly collaborative. Everyone wanted to share their experiences and best practices. I saw an opportunity to formalize some of that. You juxtapose that with the investors who are, in most cases, making phenomenal returns. The traditional model is very much tilted in favor of investors. Bovard saw an opportunity to provide searchers a sense of support and community, much like startup accelerators like Y Combinator, which bring entrepreneurs together for a set of period of time, providing resources, mentorship, and access to investors. Since its founding in , SFA has recruited a class of searchers annually and is in the process of recruiting up to seven searchers for next year. Much of their value-prop centers around helping searchers optimize their processes and find companies that are the right fit for their skillset. For a traditional searcher, it may takes months of trial and error to get to the same level. The things that they go over range from brass tacks strategies like best practices for executing a direct marketing email campaign in a proprietary search process to more abstract lessons on how to think like an investor, says Bovard.

How the Accelerator Model Works

An award-winning team of journalists, designers, and videographers who tell brand stories through Fast Company’s distinctive lens. Leaders who are shaping the future of business in creative ways. New workplaces, new food sources, new medicine—even an entirely new economic system. You want to run a company but have neither the experience to get hired as CEO nor a brilliant startup idea to launch your own. How about buying up a promising small company and becoming the CEO right away? In a search fund, entrepreneurs—often newly minted MBAs—find investors to finance and mentor them. In the search phase, investors essentially pay the entrepreneur to scour the country for a company with potential. In the acquisition phase, the investors back the entrepreneur with capital to buy the company, and some of them provide guidance to build it into something bigger.

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If you’re new here, please click here to get my FREE page investment banking recruiting guide — plus, get weekly updates so that you can break into investment banking. Thanks for visiting! I had no clue what they were, so I had to Google the term, read through a few reports, and give a rough answer. But then, a few months later, a reader with firsthand experience working at a search fund volunteered for an interview — so I went straight to him for the full story:. A: Sure. Historically, search funds have targeted services companies, but IT and healthcare acquisitions have become more common over time. It seems like entrepreneurs start search funds if they want to operate an existing business without starting the business. A: Going into undergrad, I was initially interested in politics and did an internship in the U.

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Whitney is the founder of Tried and True Mom Jobs, a blog about legitimate ways to make money from home. Your cash back will be deposited into your Ibotta account within 48 hours. This receipt app was the first one I tried, and still my favorite to this day. See the money-making guide that 50, others have downloaded:. This list has only the best apps for making money, both for Android and iPhone. Consider making money with Airbnb. Did you see any jobs that may work for you? Paid nothing upfront. As the name suggests, InboxDollars will pay you for opening and skimming emails and answering simple surveys. Another good way to make money is to write product reviews and promote them as an affiliate. You can follow me here. It is safe to say that there is a mutual fund for almost any niche or investing objective you may wish to achieve. Postmates is amazing in Dallas, TX.

Stage Two: Searching

Unfortunately, many new investors, as well as countless retirement account holders, probably can’t actually tell you what a mutual fund is, how a mutual fund works, or how someone actually makes money from owning a mutual fund. Simply stated, a mutual fund is a term used to describe a type of fund set up that doesn’t do anything other than owning investments.

Some mutual funds specialize in investing in stocks, some in bonds, some in real estate, some in gold. It is safe to say that there is a mutual fund for almost any niche or investing objective you may wish to achieve. The type of mutual fund in which you invested will determine how you generate cash. If the fund specializes in investing in real estateyou might be making money from rents, property appreciation, and profits from business operations, such as vending machines in an office building.

There are three major keys to making money through mutual fund investing. These are:. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. Investing for Beginners Basics. By Joshua Kennon. It’s making money from a search fund easier to measure, contain, and appreciate risk when you keep things simple.

Think In Periods of 5 Years or More: It’s much easier to let your wealth compound if you can ride out the sometimes sickening waves of market volatility that is part and parcel of investing in stocks or bonds.

These things happen. Presuming you’ve drawn up a well-researched, sound plan based on common sense, basic mathematics, and prudent risk management strategies, allowing yourself to become emotional and selling your productive assets at the worst possible time is not likely to cause you to build long-lasting generational wealth.

Pay Reasonable Expenses: Apart from the mutual fund’s expense ratio, it is also important to consider a handful of other costs. Tax efficiency matters. Income needs matter.

Risk exposure matters. All need to be weighed against each other and other relevant factors. The point is to make sure you are getting value for what you pay. Continue Reading.

1. Blogging

For more details, please see our list of relevant resources. 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.

Stage One: Forming a Search Fund

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. Stanford — source. Are you a small business owner or represent small businesses and want to be put in touch with some of these entrepreneurs seeking to acquire and operate companies?