ASSET CLASS OVERVIEW

A Hidden Gem.

A search fund is an investment vehicle formed by individuals who deploy privately raised capital to search for, acquire, and actively lead privately held companies for the medium term.

This form of entrepreneurship-through-acquisistion was developed & pioneered in 1984 by Irv Grousbeck and has produced an aggregate IRR of 35% and return on invested capital of 5.2X.

Per 2022 Stanford Search Study.

The Search Fund Process

~6 Months

Raise

  • A Searcher raises capital from 10-20 investors. Funds cover Searcher salary, sourcing software, admin, and deal expenses.

~1-2 Years

Search

  • The Searcher spends 1-2 years identifying and diligencing a company to purchase at an attractive price.

~3-7 Years

Operate

  • After securing acquisition capital from investors, the searcher acquires a company and becomes its CEO.

~6 Months

Exit

  • Searcher-CEO sells the firm, generating on average a ~35% IRR for investors (source: Stanford Search Study).

By the Numbers.

On a 30-year basis, Search has outperformed most other asset classes.

Aggregate Search Fund % IRR Since 1984

Per 2022 and 2020 Stanford Search Studies. Search return calculations include searches that did not result in an acquisition.

30 year Expected % IRR By Asset Class

Per Blackrock Investment Institute. Data as of June 30, 2023.

 Frequently Asked Questions

  • A search fund is an investment vehicle formed by individuals who deploy privately raised capital to search for, acquire, and actively lead privately held companies for the medium term. In the traditional search fund model, 10-20 investors fund 1-2 talented leaders or “searchers” to search for, acquire, and operate a single business.

  • No. We firmly believe our “impact” angle actually will result in higher returns than the average.

  • Companies acquired by search funds are much more like private equity businesses than venture capital businesses. These are profitable small-to-medium sized businesses, which tend to be founder-owned. Search businesses are typically B2B, with a lean toward services businesses with simple business models. They span all sectors, with the most common including healthcare, business services, software & other technology, and tech-enabled services.

  • The ideal search company is:
    - Large, but not too large – on average, $10M - $15M in sales and $3M- $4M in EBITDA
    - High industry growth (at least 2x GDP)
    - Double-digit revenue growth
    - High degree of recurring revenue (typically 60%+)
    - High EBITDA margins – 30%+ (for non-software businesses)

  • According to the 2022 Stanford Search Fund Study, roughly 35-40% of traditional searchers are diverse (women or people of color). The number of searchers has grown rapidly in the last decade to 66 traditional searchers launched in 2020. The rapid growth has continued, with some investors contacting north of 100 searchers per year in recent years.

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