Raising Search Fund Out of Undergrad
What do you all think? Is it realistic for someone's first job out of undergrad to be launching a search fund? (Assuming they aren't just raising all the money from wealthy family members) If so, what background would be ideal for an undergrad who wants to do this?
Background for anyone not familiar with the search fund model - While the Stanford search fund primer is the most comprehensive, launching a search fund typically consists of 1-2 entrepreneurs who have recently graduated from top MBA programs raising ~$300,000 from ~12 investors to fund their ~2 year search for a suitable company to buy. After they have identified their target they raise an additional ~$20M, ideally from the same investors who funded their search, to buy the company. After the purchase the entrepreneurs come onto the company- typically as CEO/President - to grow the company for ~7 years before selling.
Excited to hear your thoughts!
Have you started a business before or have pre-existing relationships with investors? If no for both then I seriously doubt the possibility of it.
For a kid out of undergrad, your biggest challenge would be the convince people to give you their money, and in this case what possible reason would they have to prefer you over MBA's who have work experience? When starting a search fund, the most important thing is to have a network of people to tap for talent, investors to tap for money, and dealmakers who can bring you a good business to buy.
All this said, if you have the right connections, sure it can happen but convincing investors to me seems like the biggest obstacle because you have no track record of success yet
To piggyback off that, what is harder than convincing the prospective investors is to convince the owners of the company you are trying to buy. They aren't just going to hand of their life's work to someone with a degree (or two, if as it sounds like you are implying you would complete your MBA first). Due to the finite number of deals currently being chased around right now even within the LMM you may be competing against a MF (Source: this actually happened to me when I worked under two H/W/S founders and they lost despite having very impressive experience, yet not a lot that resembled a CEO/CFO type role).
Totally agree with you guys. And I am talking about raising one directly out of undergrad (not after MBA). I think starting/running your own business would be highly beneficial/required for an undergrad to make this enormous jump. I have been surprised how few post-MBAs who raise search funds actually have founder experience. From what I have seen, they typically have traditional finance backgrounds. Personally I have started my own company with 10+ employees. But it was not near the scale of $20M. I anticipate starting another within the next year as well (might end up doing this instead, haha). I also have search fund and traditional PE experience through internships. That being said, I'm early on in my college career and would be interested - not even just specifically for me - but for anyone, what kind of background would be necessary to make this uncommon jump? Would founding a sub-million dollar company and working at multiple PE/search funds get you into serious talks with investors? Or is the 2-4 years of IB/PE experience and an MBA too much to overcome?
These guys are being too nice....you’re wasting your fucking time.
Second this.
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