Hi all. Recently left post MBA Corp Dev role and raised some funds along with a partner and several hnw investors to buy out and run a small biz with ~$7m in revenues and about 50 employees. While this may sound like a search fund, one fundamental difference is that we are also looking to make one or two smaller acquisitions in adjacent verticals to run as separate businesses (not as add-ons to current platform) as opportunity presents itself.
I'm a bit confused as to how to properly label and explain what it is we're doing. Is it even considered a search fund or just a holding company of sorts? I'm hesitant to call it PE shop since my partner doesn't have a traditional background and is more of an operator who knows the particular industry well.
Not related but ~7m in revenue and 50 employees will be very hard to find. Also search finds have a huge failure rate. Pm if you want more info
Thanks for the response. Sorry for not making it more clear but we have already acquired the company and are currently operating it while transitioning out the original management team. Also many of the employees are hourly and paid in the mid-teens.
I'm assuming this will be a software business within a vertical market or they're eating scraps...
No expert by any means, but I have know a search fund operating in the exact same way. The Managing Partners still considered themselves to be a search fund, but highlighted the differences on their website/when speaking with various people within the industry. They also specifically look for numerous strategic acquisitions within certain industries. I consider it to be a hybrid of a more typical PE model and that of a search fund. Hope that helps
Thanks all. To be honest I'm not quite sure I want to do this for much longer so I wanted to update my resume and talking points. Running a company this small company turned out to be less rewarding than I imagined given the total lack of corporate structure and middle management as well as low quality legacy employees. I have to deal with just about everything from HR/people and IT issues to putting out small fires (figuratively AND literally) all over the place.
Really lost as far as where to go from here but not sure how much longer I can last here. I do have a bit of $ and equity tied up so it would be a hit there as well..
From the search fund case studies ive read from HBS/Stern/Wharton this is exactly what you should be expecting to deal with. The legacy employees sucking is abnormal and really unfortunate, but that should have been addressed during the due diligence phase (perhaps management wasn't transparent). Hopefully you can boost EBITDA (or have since acquisition) and look for a strategic acquirer.
Im not trying to be an asshole, and I wish you luck. You would be surprised by how many HBS/W/Booth graduates start search funds and are constantly having to solve issues that any lower-middle manager at a Staples could handle, it isn't rewarding and is extremely stressful.
My suggestion would be to network amongst your fellow searching MBA colleagues for advice, although I know this can be tough depending on what state you relocated (assuming you moved) to. The searcher community is really helpful and more team-minded than any other supplemental industry in IB/PE/HF, but thats just my two cents.
2 month update: I'm now over six months into the new gig, grew the portfolio company a bit, finally start seeing some returns (albeit very small). I'm growing frustrated with the lack of talent in the company, it's getting increasingly difficult to make and retain quality hires, however we were able to replace a number of legacy staff with new hires to help rid of the old company culture.
I'm still very hands on with the company operations (implementing new processes in the call center, integrating add-on acquisitions, building excels to be used in-lieu of custom software and seeking out new strategic investment opportunities)
Probably will start looking for a new job in January, not exactly sure who would hire me at this point (corp dev, banking, small pe?) but I really miss working in a more structured setting with successful, really smart, and driven people. Even if I make $200-300k++ a year here I'm not sure I'd be feeling fulfilled.
Hate to keep bumping this up but 2 questions that I've been pondering lately:
1) Would staying the full year in this role (vs 8 months) make a big difference as far as being seen as a job flipper? (stayed at post MBA job a bit under 2 years). I really want to give this a chance and complete the turnaround at the portfolio company.
2) I'll be turning 33 next year, I'm afraid that I'll be considered too old for a post MBA associate type role, yet too inexperienced for something slightly more senior. Am I being too paranoid? While F500 finance/strategy should still probably be doable, how would IB/PE boutiques look at this experience?
I'm no expert but I think you'll be fine, the firm I'm at just hired a vp from a search fund I don't know his exact age but its safe to assume hes older. Besides having a C level position on your resume cant be that bad haha
appreciate the response! Did this person have prior PE experience? and did the search he was at fund make an acquisition?
He had IB experience, I dont know all the details but I know they did end up acquiring company . I actually brought it up today during lunch and he had the same complaints you have, apparently he spent a majority of his time putting out little fires (dealing with arguments between workers, filling in for management when they went missing, staffing, etc). Its a smaller fund, so I think @Deal Team Six is right. If you have any questions id be happy to pass them along.
You're in excellent shape to get hired at a MM PE shop. Seriously. You are remarkably valuable.
You found out how much it sucks being the guy the buck stops with, and you succeeded. Starting anything is tough. Raising money (versus bootstrapping or taking family money) is an incredibly entrepreneurial move, and for you to successfully put your own and investors' equity capital into a business and then successfully implement operational protocols that drove growth speaks immensely to your caliber.
Who wouldn't want to hire you? You have an MBA, you've worked in a corpdev role (presumably a M&A team), you raised a search fund and closed on a target, then ran that portfolio company.
In short, both (a) rewrite your resume to look like the guy who was intentional about the progression you've had and (b) rewire your brain where the following story feels coherent.
///
"I wanted to attend a top-flight MBA program to develop both a foundational and transferable skill-set as well as a robust network that would be valuable across the duration of my career. I followed that up with a corpdev role so I could hone my deal skill-set, with an eye all along on how to develop my critical thinking skills as an investor.
Thanks to strong work performance that gave me disposable income through good bonuses, I had enough liquidity where along with a partner I was able to make substantial enough of a GP commit that private investors backed the two of us with a search fund. We quickly identified an appropriate target, closed the transaction, and I spent XX months operating the business.
I generated XYZ growth metric, ABC revenue growth, and PQR cost savings, but I was able to immediately identify how little the daily operator role resonated with me.
Altogether, this experience has prepared me for the role I've wanted all along and am now ready to pursue: a private equity firm where I can work closely to support high-caliber operators whose businesses are at an inflection point where the combination of capital and key strategic insight can unlock meaningful value."
///
You will look like a god. Seriously, if you can't get a VP/Principal job at a MM sponsor in your geography then I don't know who on earth could.
You've proven your sourcing ability (huge! so many post-MBA associate hires in PE have this as an outstanding unproven aspect of their profile), transaction skills, operating proficiency, and also access to capital (fundraising is such a key skill, both the access and ability [it takes a real level of EQ to get someone to give you one of the two most valuable resources on the planet {that would be money and sex}]).
The real question is what size of the cap range you're most comfortable playing at. A true MM firm is bang-on based on your experience to date, but you could easily scale down to lower-MM by pointing to the size of the deal you closed in your search fund and just as easily scale up to upper-MM by pointing to the deal values you touched in your corpdev role.
The beauty is that in arguably a decade, you have the perfect profile to launch your own fund. Honestly. If you successfully sourced, closed, and exited 6-8 deals you would be in the upper-quartile of prospective GPs.
If along that decade you were intentional about developing your fundraising skill-set and building the relationships that make fundraising a one-year process rather than a three-year abortion, as long as you delivered anything over 2x net (the bar is literally that low) you will get some interest. The terms may not be what you want (e.g. 1-and-10 on the first fund) but they will be there.
Or, hell, if your track record is better (3x, 4x ... doable in the lower-MM) // you're able to commit 10% of your target thanks to the carry you've earned from your decade at someone else's shop // you used your own income to close on a deal or two and plan to contribute those at cost as your GP commit ... you may be one of those guys who blow the doors off and go past their target on their first fund with full fees.
I would be less passive (you sound like a smart, humble, thoughtful guy) and take some time to think strategically about how to package everything that you are into a compelling story (see script above). Those traits (smart and humble) will take you really far.
I don't know where to begin, but I cant thank you enough for responding. Your extremely thoughtful and helpful response is more than I can ever ask for! It's given me the motivation to continue powering through knowing that there is a light at the end of the tunnel even if this search fund venture doesn't end up working out.
Now that I think about my last few career moves in retrospect, the career progression story of becoming a strategic investor that you hinted at above absolutely makes sense and connects all the dots given that I did an IBD Associate internship, Corp Dev (M&A) full time, and now the Search Fund)
Thanks again for taking the time to provide your thoughts, it's much appreciated!
You're welcome. Thanks for the thanks. You have done a lot of cool stuff. Life is about narratives, if you can string together a compelling story you'll win at more of your at-bats.
Hey Guest1655, how did things turn out? Really enjoyed reading through these posts, though it was 6 years ago.
Did you end up scaling the business further? Selling and transitioning into IB/PE?
I'm considering a similar path myself (I have IB + operating experience) and want to do spend more time investing in the future (maybe as an independent sponsor depending on how things shake out).
can pls i hire you as a life or career coach? cc @WallStreetOasis
You couldn't afford me.
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