Investor Criteria for Search Funds

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January 12, 2022

by an investor from The University of Chicago - Booth School of Business in Louisville, KY, USA

For the search fund investors here, what criteria do you use for evaluating traditional search fund investments? How are you evaluating new search funds seeking capital, and what do you look for in searchers? Any good references or studies out there anyone can recommend? Thanks.

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Reply by an investor
from The University of Chicago in Louisville, KY, USA
Most agree with ^redacted‌ that investors are looking for some kind of value proposition or "edge" in (eventually) managing the business. Could be industry experience or functional like marketing, operations. Even though the searcher is relatively less experienced, there still should be some idea of how to manage and effectively grow the future acquired company. Too many searchers are entering fundraising talking about the asset class and not enough about their personal story and strategy.
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Reply by an investor
from The University of Chicago in Louisville, KY, USA
Preference for traditional search funds. More time to evaluate the future CEO through conduct of the search. Many view this is as the ideal model in terms of building the right network of smart capital, board members, support to key areas, and entrepreneurial flexibility ... so investors may question why a searcher would choose a model other than TSF. "Why would you NOT want to have 15 smart, entrepreneurial investors behind you from the beginning?"
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