Hi,
After c. 3 years in PE (just prior to becoming VP), I was laid off together with basically half my team, and am now very keen to try out starting a search fund. What would you reckon the optionality is to return to PE after either a full search cycle (call it 5 years) or say 1.5y if the search has not been successful?
My initial hypothesis is that, in the scenario in which the search is unsuccessful, one could return to a similar level although with a bit of headwind; and in the 5y successful scenario it would be very easy and could probably come back as a principal. Do you agree with this? Really want to ensure I do not burn any PE bridges just by venturing out like this.
I'm an operator and have run a number of businesses. I've been on both sides.
There's no rules to anything in life, however I would intern with someone in the search fund community who is currently operating a business. It's difficult and way harder than being an employee at a PE fund.
If I had to do it all over again, I would have stayed in finance. You're going to take 10x the risk to make at best 2x or 3x of what you would have been staying in PE.
https://yale.app.box.com/s/pxao2wy88lrbf462jx4mg1ex2jh9eack
https://yale.app.box.com/s/0mo483h9lmfd04bl1om9dkc7oz4xm2s6
are you a yale alumn? I'm thinking about going to work for a search fund and wanted to ask you some questions privately if that's alright
I don’t recommend a search fund at all. The space is incredibly crowded and you’re also competing against traditional PE for assets. The odds of successfully finding a business to buy are very low and that’s when the “fun starts” and you actually have to successfully run the business. Unless you have no path forward in PE, the much safer bet with a better risk-adjusted ROI is traditional PE.
Thanks very much, that is very helpful.
It has been c. 2.5 months since I was laid off and have not had much luck in recruitment processes (and also only managed to get 3 processes in all that time). For that reason - combined with the fact that I live in a smaller geographical market where PE salaries are c. 50% of what they are in NYC/London (meaning that the discrepancy between PE vs search fund is not as significant as some have noted) - I think I will start to look for small cap companies to acquire (c. $1m EBIT) whilst I am waiting for recruiters to bring me opportunities. Should the search fail, I will at least have something that can explain the gap on my CV.
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