Is an MBA necessary for creating a Search Fund?

Thanks for the tag ^Searchfunder member‌ and nice to meet you ^Searchfunder member‌

I was a small business owner before business school and now I have an MBA, so I see both sides a bit. I also started the ETA club at school and am now a self-funded searcher.

Short answer is no an MBA is not necessary. People have been "searching" and buying businesses long before it was trendy and there was a fancy name for it. Long answer is an MBA can be very helpful depending on the type of search you're conducting.

If you're a self funded searcher and going the SBA route, it's definitely not needed. Honestly, it can hurt you in some ways. At the $250k - $750k SDE level, talking too "business school like" can be a massive turn off to the seller. Especially being in the small business world before school, I've learned that many people in our world distrust MBAs. They associate us with "private equity overlords coming in to fire everyone and cut costs". In many situations, assuming offers are similar, you will win a deal if you can prove you care about legacy, taking care of employees, etc. MBA doesn't scream "small business leader". It screams "corporate leader". It's all how you pitch it but I'd say even personally I don't talk much about my MBA when talking with potential sellers. I'm generalizing, but at this size of business I've met sellers that can't even tell you the amount of revenue they generated last year. Insane, I know. But that's why coming in too MBA heavy can be a disservice in this scenario.

In this scenario, if you can afford to search on your own, can afford the 10% down or can put it together with friends and family, the MBA means nothing.

If you're planning to raise a traditional search fund, the MBA matters a lot more.

In my opinion, this isn't because the MBA will give you magical CEO skills for a larger company. It's because traditional search investors 1) use the MBA as a "filter" because it's easier to compare candidates apples to apples (like any company would do) and 2) because MBAs are a stationary, easy to target audience. It's way cheaper to hit a few b schools for "deal flow" than it is to put out Google ads and hope to get qualified potential searchers.

You can 100% network with traditional search investors without the MBA. You can cold email, you can attend conferences, etc. But it will be a tougher sell because there are now more MBAs than ever before seeking traditional investment. If you come from a banking or deal associated background, you'll have an easier time getting funded even without the MBA. If you don't have an MBA and aren't former IB/PE, you really need to stand out and prove you want to be in this world. Happy to chat more about what that looks like if interested.

Summary: it's not needed, but you may need to hustle more without it.

That said, personally having an MBA has made me a more well-rounded operator. Everyone has their strengths and weaknesses, but my knowledge of finance and cash flow management (which I focused on in B-school) is SIGNIFICANTLY better than it was before b-school. Depending on the company you buy, that may or may not be a huge deal. You can obviously learn some of that on your own outside of school, hire someone, etc. But it's helpful to understand every division of your company so you can better manage your employees. Doesn't necessarily require an MBA, but that's some final food for thought.

Thanks for the tag ^Searchfunder member‌. Well, Does MBA help- Yes, But is it required-No. There are so many resources available here on Searchfunder and outside that could help someone without an MBA to kick-start their ETA journey. Happy to help, should you need any specifics Jeremiah. Good Luck with your search.