Who funds these random search funds
Title. Saw a post that some MBAs raise millions for this. Sounds kinda retarded to be honest ……………….
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tons of people in the space.
they also are NOT giving millions to an MBA. they intially funding them about 150k a year in salary to "search". upon the searcher finding an opp for them, they assist in the capital raise to purchase the asset (like how a fundless sponsor works), contributing a bit of equity themselves
they then sit on the board, have an equity stake, and then order around the searcher who is on some punshing particpating preferred equity construct.
its actually a brilliant con. a legit mm firm has to pay a lot of salary and bonus to junior employees to help sources deals. a search fund model they can dish out materially less per year to some guy who will grind and grind and then once a nice opportunity falls in their lap they can take over and run the investment. Most have like 10-20 searchers in their docket each year (paying a portion of that 150k salary along with other LPs) and can pick and choose what deals to actually invest in.
I think the real winners are the search fun LPs/enablers....not the actual searcher pawns
what's the technical difference between a search fund and a fundless sponsor?
Main difference in a searchfund the searcher steps in as CEO after acquisition.
Any idea what comp is like for Post-MBA investment team hires at the search funds themselves?
Search funds are typically funded by a variety of investors, including institutional limited partners (LPs), high-net-worth individuals (HNWIs), and increasingly, family offices. These investors often view the capital provided to search funds as a form of a call option on the eventual acquisition the fund managers aim to make. The appeal for investors is the potential for high returns, as search funds often target small to medium-sized businesses with the intention to grow and sell them for a profit.
The process of raising a search fund is relatively easier if the individual comes from a top-tier MBA program, as investors tend to trust the training and networks these programs provide. This trust is crucial since search funds typically involve a significant amount of discretion and autonomy in finding and managing the target company.
Sources: Point of a Search Fund?, LMM PE or MBA better for Search Fund / Entrepreneurship?, Starting A Search Fund (Micro PE Firm), Search fund model vs Sponsorless PE Fund, Independent/fundless sponsor and Family Office surge
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