Search fund bubble
January 24, 2020
by an member from Universidad Nacional de Educación a Distancia in 11100 San Fernando, Cádiz, España
The SF model is getting more know. More and more search fund are raised every year, and a lot of MBA are pursuing entrepreneurship through acquisition. How much growth do you think there's already ahead? Is it a good time to raise a search fund?
I would love to know your opinions.
from Cornell University in Los Angeles, CA, USA
1) 5x more searchers than xx years ago (didn't capture the baseline date...but it was not salient to the point he is making which was that yes there are record #s of searchers). Search Funds are attracting more entrepreneurs. PERHAPS including some that aren't right for the space. Implication...likely to see more failures in absolute and perhaps relative terms
2) if there are 5x more searchers, there is 10x more capital. Implication --> searchers *should* in theory start to get better terms for deals.
3) More debt available with more generous terms. Implication --> JSS views debt terms/covenants as good guardrails preventing the entrepreneur from taking unnecessary risk. His POV: Loosening terms to lead to disappointment
JSS also stressed there is no "perfect" search fund business or entrepreneur....rather the match of the two (the biz profile + the searcher's combo of experience/resourcefulness/grit) that determine success.
Is it a good time? I see the answer to this question as such a personal thing...what may be good for me is bad for you or vice versa. How risk tolerant are you...are you self funded or not...what is your personal cushion...size of deals you're looking at. There will always be a market for *something*...finding the *right something* at the *right time* is where the work, discipline, and some good luck come in. Not the clean yes/no answer you may be looking for.
from University of Virginia in New York, NY, USA
Its easy to imagine that if all your business school peers are hanging a shingle that the market is saturated but how many people attend business school, let alone one with these types of programs? People have been buying and selling small businesses for as long as they have existed, just because the process has now been given a fancy name does not change that.