Definition
Search Fund
A vehicle used by entrepreneurs (searchers) to raise capital, find, acquire, and operate a single business.
Definition
A search fund is an investment vehicle where an entrepreneur (the "searcher") raises initial capital from investors to fund a 2-year search for an acquisition target. Upon finding a suitable business, the searcher raises further capital to fund the acquisition and takes an equity stake. The searcher then operates the business as CEO. Search funds are prominent in the ETA (Entrepreneurship Through Acquisition) community and are common among MBA graduates seeking to become operators rather than founders.
Worked Example
A searcher raises $500,000 from 10 investors to fund a 2-year search. After identifying a commercial cleaning business, they raise $2M to fund the acquisition, receive a 20% equity stake, and become CEO.
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