Search funds

Search Funds and Entrepreneurship Through Acquisition Search funds are investment vehicles formed by one or two individuals to search for, acquire, and lead a privately held company for a medium to long term of 6 to 10 years [1]. They serve as an alternative to start-ups for entrepreneurial spirits, featuring persistent high returns and low correlation with traditional asset classes [6]. Historical internal rates of return (IRRs), calculated from the 2020 Search Fund Study by Stanford's Graduate School of Business' Center for Entrepreneurship, are 32.6% for North American search funds [6]. Meanwhile, historical IRRs calculated by IESE's Search Fund Center stand at 28.7% for International search funds [6]. ## Search and Fundraising Process Prospective searchers should speak with 25 to 35 individuals in the space before fundraising and developing a Private Placement Memorandum [1]. Firms like Relay Investments act as lead investors by taking a 15% to 25% stake on cap tables and investing $1 million to $3.5 million in equity checks, while also providing mentorship, resources, and board participation [1]. Endurance Search Partners invests in diverse search fund structures including committed capital, long-term hold vehicles, due diligence funds, multi-search funds, and independent sponsor platforms [9]. Successful searcher CEOs demonstrate strong discipline, sales skills, technical skills, a bias towards action, and a willingness to learn [1]. ## Target Company Criteria and Operations Firms backing searchers look for profitable lower-middle-market companies with sufficient scale, established teams, defensible cash flow, and strong revenue quality. WSC & Company typically invests in profitable lower-middle-market companies generating $2 million to $10 million in EBITDA [5]. SIG Partners seeks businesses generating $4 million or more in annual revenue [12]. Target businesses are acquired to create superior returns through revenue growth, operational efficiencies, scale, modest financial leverage, and improved management techniques [11]. Post-acquisition philosophies often emphasize long-term appreciation with Anacapa Partners preferring to make few radical changes to the existing business in the first 12 to 18 months [11]. Additionally, SIG Partners maintains a 99% post-close employee retention rate with an average owner transition period lasting 90 days [12]. ## Investor Landscape and Portfolio Scale Several established private equity firms and investment houses support the search fund ecosystem globally: - Housatonic Partners, founded in 1994, manages over $1.5 billion, has invested in 110+ companies globally, maintains an average hold period of 7+ years, and notes that 40% of its backed CEOs have repeated as CEOs or invested in its funds [3]. - WSC & Company has backed over 120 companies and more than 300 entrepreneurs, representing over $2 billion in portfolio enterprise value [5]. - Trilogy Search Partners has partnered with entrepreneurs to acquire and grow more than 90 businesses since 2014 [7]. - Endurance Search Partners brings over 16 years of experience with more than 350 partnerships and 190 investments across the U.S., Canada, and Europe [9]. - The Cambria Group has invested in over 300 business platforms and hundreds of add-on acquisitions across more than 40 states and Canada [10]. - SIG Partners has paid $315 million to business owners and purchased 37 businesses in the last 5 years [12]. - Vonzeo Capital invests globally across countries including Australia, Brazil, Canada, Colombia, Czech Republic, France, Germany, Japan, Mexico, Poland, Spain, the United States, and the United Kingdom [6]. ## What is not covered Specific debt financing structures used during acquisitions and detailed sector-by-sector performance breakdowns are not provided in the sources.