I have not spent enough words writing about the impact of Search Funds has had on my thinking. I first wrote about Entrepreneurship Through Acquisition six months ago, but my research in the meantime has continued.
The Columbia Entrepreneurship Through Acquisition Club Resource Page has many great articles and my research spread from there. The basic concept is to raise two funds. First is a small fund to support you for one to three years while you search for a small business to buy. Once you have found the business, you finance the purchase through raising equity, and a combination of bank and seller debt. You then run the business as CEO until exit, usually within five to seven year to Private Equity.
This concept was so exciting to learn about I became obsessed, consuming all information I could find and talking to everyone who would listen. To me, it seems like such a wonderful opportunity to experience many exciting aspects of business in a short period of time: company research, due diligence, acquisition, management, growth, exit. At at the end is the opportunity to make life changing money. Your investors have real opportunity to make money as well, since it requires smaller sums than traditional Private Equity and companies are usually bought at 4-6x multiples. This to me seemed like the way to exit the corporate world, and get real business experience.
This model also brings with it a small community of investors, operators, alumni, and funds. It seems like a passionate group of people. Through the club at school, I got to meet fund and accelerator operators who had been through this process and in the community for years. I felt like I had discovered something special that fit with so many of my goals and skills.
The approach that I found the most interesting was the Search Fund Accelerator of which there are less than a handful. In that model you join a cohort of searchers and have the backing of the accelerator during your search. The accelerator also manages the fund for the purchase and has actual mentors for you while you manage the business.
My only concerns have been around how to actually pull it off. Could I live on a much smaller salary for the years it took to purchase the business? Could I move out of New York City if I found the right business elsewhere in the country? Would the numbers work out to make it worth the effort at the end rather than getting a higher paying job for seven to ten years?