The path to becoming an entrepreneur through a Search Fund.


A Search Fund is a proven and viable method for one or two entrepreneurs to acquire and manage a company, with the help of a group of investors who will support them throughout the process.

Search Fund entrepreneurs are young professionals, but with good work experience and an excellent graduate education. They have a strong entrepreneurial drive and the ambition to convince investors to support them in the search and acquisition of a company in order to manage and grow it.

If you want to be a CEO, lead the growth of a major company in your industry, and create significant wealth, the Search Fund path is for you.


Is it the right path for you?

Entrepreneurs set up an investor base, ideally with a diverse, complementary profile and a willingness to advise and guide the searcher through the life cycle of the fund. In the first round of financing for the search phase, it is intended to cover the operating expenses of the search for 24 months.

Search Phase

How to find the right company?

During this phase, the entrepreneurs work on the search for a company acquisition opportunity based on criteria that guarantee the desired opportunity. A pipeline of opportunities is generated, and along with the Advisory Board, their attractiveness and viability is evaluated, based on an in-depth analysis of the company in question and the industry. Entrepreneurs will review hundreds of companies to find a great opportunity at a reasonable price.

Acquisition of the company

How to execute the transaction?

The entrepreneur negotiates the terms of the acquisition and raises a second round of capital from investors. Once the parties agree, and due diligence is completed, the deal is closed and the transition to the new ownership team begins.

How is the management and value creation?

Manage and growth

The entrepreneur assumes the role of CEO, often with the support of the former owner during a transition period. Entrepreneurs typically focus on organic growth, using various operating levers, and operate their business for several years, providing significant value to their investors and themselves. The Board of Directors assists the new director(s) in making strategic decisions, and provides support and contacts when needed.


How and when to divest?

Most search funds are created with a long-term perspective, generally with a time horizon of over 5 years, and often longer. The average holding period for an investment in a search fund is seven years. Entrepreneurs must have the ability to successfully sail through an environment with high levels of constant uncertainty and challenge.

Key characteristics possessed by most entrepreneurs include a strong work ethic, sales and interpersonal skills, humility to learn, a drive to excel, and the ability to execute with high energy.

Entrepreneurs first return to their investors the capital invested plus a preferential return, and thereafter share the remainder of the value generated with their investors.


ETA suits those seeking career ownership, an accelerated path to a small or medium-sized business CEO role, and a collaborative work style. To determine if ETA aligns with your goals, objectively assess your strengths and preferred environments. Successful Search Partners often thrive with autonomy while valuing collaboration with investing partners. They enjoy business building, particularly the challenge of scaling a business. Gathering insights from current and former Searchers, Search CEOs, and investors is crucial for an honest self-assessment. There's no universal 'right' answer; it's about finding what's right for you.

Most of successful Searcher demonstrate a distinctive set of traits: an entrepreneurial mindset enabling them to thrive in unstructured environments; strong leadership and emotional intelligence to influence and motivate others; an executive orientation, making decisions even with limited information; and sufficient capabilities or a rapid learning aptitude in crucial areas like industry analysis, due diligence, financial analysis, strategy development, sales, and leadership. This diverse skill set is essential for navigating the challenges of the Search process and eventually stepping into the role of a CEO.

In general, Searchers spend at least six to twelve months planning for and raising capital for a search fund. During this time, the Searcher will network within the search community, identify initial industries of interest, write a Private Placement Memorandum (“PPM”), meet investors, and raise capital. In our experience, those who are best prepared often complete at least one internship in search prior to searching – for a current Searcher, search CEO, or search investor. Building relationships within the community – with current and past Searchers, search CEO’s, investors, and community partners – is the most important part of this process as these relationships will be critical to your success throughout your search journey. The majority of the Searchers come directly out of MBA programs. However, we also enthusiastically partner with Searchers who are further along in their careers. For these prospective Searchers, it is particularly important they network broadly within the community prior to raising their Search Funds.

It is a personal decision. There are successful Search Funds both operated individually and with a partner. In Europe, approximately 40% of search fund entrepreneurs have a partner, while in the U.S., this percentage decreases to 20%.

However, the latest Stanford study suggests a correlation (not causation) between search funds with two partners and the best results in the top quartile, which are not easy to explain. There are dynamics, such as an entrepreneur's listening ability, tendency to seek advice, or skill in discerning good and bad guidance for their strategy, that impact the final outcome.

Ultimately, the decision is yours. It is a very personal and complex choice that requires careful consideration. Both options have advantages and disadvantages. Obviously, two people can move faster than one, provided they share the same goals, personal and professional needs, and complement each other well. If an entrepreneur chooses the solo path, there will be less support but more independence and freedom to make certain decisions. Economic rewards will be greater, and the ability to find a company will increase, as a single searcher can target smaller, more numerous companies, thereby increasing the chances of success. The challenge lies in the lack of skills or experience in certain areas. One way to mitigate this is by incorporating another recent MBA graduate or an operator with expertise in the areas where we lack experience, either during the search or shortly after acquisition.

The average capital raise for the search phase is around $400k for a solo searcher and around $700k for a partnership search. This budget covers the Searcher’s costs for 24-30 months. The capital raised is used to cover a moderate salary for the Searcher, as well as to fund the expenses associated with the search, such as travel, software and database subscriptions, legal and accounting fees, interns, offices expenses, and other expenses related to the due diligence process.

Our overwhelming experience suggests that the quality of the acquired company and the sector it operates in are the most influential factors for a favorable outcome for the entrepreneur. The third most important factor is the size of the acquired company; the larger, the better.

A sector-focused search enhances the odds of acquiring a good company. In these types of searches, each interaction is additive, expanding the searcher's knowledge base. The searcher builds a credibility relationship that fosters trust with the eventual seller who decides to sell their business to the entrepreneur.

After the acquisition, the larger and more fragmented the sector, the more opportunities there will be for an entrepreneur with resources to build a significant company, through organic growth and acquisitions.

In the United States and certain South American countries, with vast territories and larger markets, it is possible to focus the search on a specific region or area. In Europe, it is advisable to concentrate on one's own country for obvious reasons (language, culture, legislation, etc.).

Focusing on a single region within a country may potentially limit the search, though it will depend on the idiosyncrasies and size of each country. France, for example, is not comparable to Lithuania or Slovakia.

Yes. As a prospective entrepreneur, you offer more than just a transaction. You are set to inherit the business from the owners and continue building their legacy, which is crucial to them. You enable them to retire or work on projects that fulfill them personally. You are a unique buyer whom they recognize as a younger version of themselves.

The selling entrepreneur seeks to receive a fair price, but economic motivation and maximizing the financial amount are not their primary drivers. They already have substantial wealth, and other aspects are more important to them, such as ensuring the continuity of the business or avoiding leaving their employees without jobs, situations that could arise with other types of buyers.

Search CEO’s create value by driving sales, exercising pricing power, professionalizing their organization, expanding margins, deleveraging, and sometimes by acquisition-driven growth. In the first year of ownership, a lot of our Search CEO’s focus is on organizational development including hiring and incentivizing team members; more proactive sales and marketing; and professionalizing operations, especially the finance function by hiring a Controller/CFO, improving the budget planning process, and building a strong working relationship with the company’s lender. As time goes on, Search CEO’s may focus on additional value creation levers including margin improvement, expanding into new product areas or service lines, pivoting the business model, or pursuing acquisition-driven growth. Collectively, over time, these efforts generate value through topline and EBITDA growth, generating cash to pay down debt, and potentially improving the multiple the business is worth at exit. One of the Board’s primary roles is to help guide the Search CEO on how to develop, sequence, and pace value creation initiatives.
The decision to exit a business is one of the most important decisions in the operating phase and is a collaborative decision made among the CEO and the company’s board of directors. We typically hold an acquired business for 4 to 6 years although this varies greatly based on a Search CEO’s goals and market conditions. We are strong believers in the value of long-term compounded growth. However, we recognize that other search investors as well as Search CEO’s themselves may see value in a shorter hold period so are flexible to optimize hold period for each investor based on the consensus view of all stakeholders and overall market conditions.

There is no "magic wand," but the key to success will be determined by the quality of the searcher and the company they manage to acquire. A great entrepreneur is someone who is highly motivated for this project, capable of overcoming all the challenges ahead, optimistic yet realistic, and willing to listen. This will lead them to acquire a solid company in an attractive sector and enable them to lead their employees with enthusiasm to bring out their best, taking the company to the next level. An involved and supportive board of directors can prevent the entrepreneur from making any major mistakes in the beginning as they learn to manage and grow the business.

Once you have thoroughly researched Search Funds and spoken with as many Searchers and other individuals involved in the model (lawyers, investors, etc.) as possible, you will need to decide if this is the path you want to pursue.

If that's the case, reach out to us, and we'll be delighted to assist, advise, and accompany you in this process. While the search fund community is welcoming, our attitude, genuine interest in you, and comprehensive understanding of the model from various perspectives set us apart from others.

According to the International Search Funds Study 2022 published by Stanford Graduate School of Business, 66% of searchers successfully acquire a company. After the acquisition, during the management and growth phase, 71% of the companies managed by search funds achieve positive returns, with an average gross IRR exceeding 30%.

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Hormes Capital Search Fund Advisors