Andy posts and points me to some Stanford business school information on Search Funds. A free, Stanford business school note/search fund study is here (before clicking: note PDF link). The Stanford site indicates:
Conceived in 1984, the search fund is an investment vehicle in which investors financially support an entrepreneur’s efforts to locate and acquire a privately held company. Recent MBA and law school graduates are using this approach more and more frequently to become entrepreneurs shortly after graduation, despite their lack of operating experience.
It’s something I thought about doing (for a passing moment) when I originally moved to Dallas – for some reason I’ve never heard the name of this type of thing. Perhaps it is because it’s kind of a hybrid between middle-market investment banking, LBO, and angel funding deals. I never learned about this type of fund at the University of Chicago’s course on Entrepreneurship, Private Equity, and Venture Capital. Additionally, I’ve not run into any friends that have used the term. Kind of funny. I suppose another explanation for me failing to catch the term "search fund" is that I tend to like straight-up equity deals better – then I can forget about all of the "complex" finance stuff associated with debt deals like unlevering the beta, using the adjusted present value(APV) method, etc. 🙂
This term was new to me as well. Throughout my undergrad education at the University of Minnesota’s Carlson School of Management in Entrepreneurship & Finance, my friends in the industry, and the classes I have taken thus far at the University of St. Thomas, I also have never heard the term used. I had heard of the idea, but it was never referred to as “Search Fund.”