PE Path to Eventually Start a Search Fund
What would be the best path that sets someone up to eventually start their own search fund that targets small businesses.
Experience at a UMM or MF would give you the name brand for fund raising, but I would imagine the operating experience would be minimal
LMM wouldn't give you the name brand but you would likely be getting sourcing an operating experience that is much more transferable to starting your own fund in the future.
Is there a balance? Would it make sense to pass up on larger funds to get the operating and sourcing experience?
Does doing some time at a larger fund and then moving downstream to a LMM give you the best of both worlds?
Based on the most helpful WSO content, it seems that the best path to eventually start your own search fund would be to gain experience in Lower Middle Market (LMM) Private Equity (PE). While Upper Middle Market (UMM) or Mega Funds (MF) might give you a name brand for fundraising, the operational experience might be minimal.
On the other hand, LMM might not give you the name brand, but you would likely gain sourcing and operational experience that is much more transferable to starting your own fund in the future.
As for finding a balance, it could make sense to pass up on larger funds to get the operating and sourcing experience. However, spending some time at a larger fund and then moving downstream to a LMM could potentially give you the best of both worlds.
Remember, launching a search fund without any prior investment experience is certainly a very uphill battle. So, it's better to go the LMM PE route, and then either search fund or top MBA then search fund.
Also, gaining more operational exposure could be beneficial as there's only so much relevant experience you can learn in Investment Banking (IB). Joining an operational-focused LMM PE fund, or even a highly acquisitive Corp Dev team that provides exposure to integration could be a good move.
Lastly, keep in mind that any move outside of your current team in IB would likely result in less pay. But if your ultimate goal is to start a search fund, these experiences could be invaluable.
Sources: Starting A Search Fund (Micro PE Firm), Best Path Before Entrepreneurship / Search Fund, LMM PE or MBA better for Search Fund / Entrepreneurship?
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