… EXCERPT …
To young MBAs seeking to own and manage a company early in their careers the search fund model offers a unique opportunity. Since a majority of startup businesses that fail do so very early on, an aspiring entrepreneur who wants to avoid company formation risks can instead buy an existing business.
For investors, a search fund represents an attractive investment for several reasons: Above average returns; Limited initial investment– The search fund is a staged investment; Personal interest– Some search fund investors describe being partly motivated by the interest of helping a young team succeed. Of course, the financial aspect of the deal needs to be appealing, but this additional motivation can forge a strong bond among investors and fund principals.
“Lately, there are signs that the search fund model, which by no means is commonly understood in the business community or even in private equity circles, has begun to become more established. Several private equity firms have begun investing in search funds…This trend provides greater support for the search fund concept and adds credibility to new search funds. ”
TUCK SCHOOL OF BUSINESS AT DARTMOUTH COLLEGE