Congratulations! You've decided to raise a Search Fund and become an entrepreneur.
What’s next? Raising your fund. It’s time to develop a private placement memorandum (PPM), which will include a handful of important items, such as:
- Search strategy (industry or opportunistic)
- Industry and company screening criteria
- Your resume, background, and why you want to be a Search Fund entrepreneur
- Fund size, unit size, and general economic terms
- Investors you want as long-term partners
Raising a Search Fund: What do we think?
The beauty of entrepreneurship is that there is no specific blueprint for success. However, several key ingredients are prevalent in nearly every successful Search Fund:
- Industry-driven searches yield quality companies at reasonable prices
- The size, growth, and quality of the industry you buy into matters…a lot
- A history of profits and growth is the best predictor of the future
- Contractual recurring revenue is critical
- EBITDA of at least $2 million gives you the cash and scale needed to grow faster
- Simple operations allows you to learn quickly and think ahead
- High cash flow generation (i.e., low maintenance capex and high margins) is great