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Redefining Entrepreneurship: What To Know About Search Funds

via Forbes

"In the rapidly evolving world of entrepreneurship, we're seeing traditional models give way to innovative solutions that are redefining the path entrepreneurs can take. Several decades ago, if you wanted to launch a business, you had to either raise capital from investors, self-fund the project or get financial assistance from a bank in the form of debt. Most early-stage founders were too early to raise capital from investors, they did not have hundreds of thousands of dollars lying around to invest in a business, and they did not have collateral to provide a bank to secure a loan. So what options were left?

 Equity crowdfunding and search funds are two innovative solutions that have been brought to the market to help bridge this gap. I have already written in depth about equity crowdfunding and how it is transforming the fundraising landscape for entrepreneurs. In this article, I will be covering the search fund model, which is a path for entrepreneurs to raise capital, acquire a business and create value for shareholders.

Instead of starting a business from scratch, search funds allow aspiring entrepreneurs to raise capital from search fund investors (investors who specifically invest in this industry). These investors back the entrepreneur's journey, providing the necessary resources (from capital to advisory) to first search for established and profitable businesses, and then acquire that business and become CEO. It's a fast-tracked way to own and operate a profitable business, with the end goal of growing the business and creating liquidity for shareholders."