Search Funds offer a unique opportunity for young, aspiring entrepreneurs to acquire and lead small or medium-sized businesses, supported and mentored by experienced investors as they step into their first managerial roles. This model was pioneered in the 1980s by H. Irving Grousbeck at Stanford and has since gained traction globally, including in Europe.

 

Typically, a Search Fund is established by one or two entrepreneurs, often referred to as “Searchers,” who seek financial backing from a group of experienced, mentor-like investors. These investors provide the capital necessary for a dedicated search phase, which can last up to two years. During this time, the Searchers work to identify and acquire a profitable, stable business. The target company typically has recurring revenues, long-term customer relationships, and growth potential, often in industries with minimal regulation.

 

Once the acquisition is complete, the Searchers take over as operational leaders, applying their entrepreneurial drive to enhance the company’s value. Investors support this transition by offering mentorship, industry insights, and strategic guidance, while also benefiting from equity participation in the business.

 

Search Funds create a “win-win” scenario: young entrepreneurs gain an accelerated pathway to entrepreneurship without requiring significant initial capital, while investors achieve returns by facilitating a seamless generational transition or business exit for company owners. This model also addresses the growing challenge of succession in the small and medium enterprise (SME) sector, particularly in Europe, where many business owners struggle to find suitable successors.