Title: The Rise of Search Funds: A New Path for Young Entrepreneurs
Edward Silva, a Stanford Graduate School of Business student, had dreams of becoming a chief executive and starting his own company. However, a classmate introduced him to the concept of search funds, where entrepreneurs raise money from investors to buy and run existing companies. Intrigued by the idea, Mr. Silva raised over $30 million and acquired MásLabor, a Virginia consulting firm, in July 2021.
Search funds, which started as an experiment four decades ago, have gained popularity in recent years. Nearly $800 million was invested in search funds across 2020 and 2021, showcasing the growing interest in this alternative entrepreneurial path.
The typical search fund strategy involves raising initial funding to cover expenses while looking for a profitable company in a fragmented industry with retiring owners. If a target company is found, a second round of funding is raised to acquire it, with investors making a return when the company is sold or goes public.
Entrepreneurs like Mr. Silva and Kelsey Holland, a Harvard Business School graduate, are embracing search funds as a way to achieve their goal of becoming chief executives. Ms. Holland, who raised half a million dollars to acquire a health care company, acknowledges the competitive market but remains confident in her ability to find the right opportunity.
As search funds continue to attract investors and young entrepreneurs, the landscape of entrepreneurship is evolving, offering a new avenue for ambitious individuals to pursue their dreams of running a company.
