Buy or build? A primer on European Search Funds

Search funds have grown in popularity over the last few years. For those who haven't come across the term, a Search Fund is a mechanism by which individuals raise capital to purchase single businesses, often from retiring owners.

Buying businesses isn't a new phenomenon, but Search Funds specifically are growing in attractiveness for entrepreneurially-minded people who prefer the idea of taking on an existing challenge, rather than the uncertainty of building a business from zero to one.

It's a concept which was born out of Harvard Business School, but has since well established itself more widely in the US, and increasingly Europe too. As business owners retire, this leaves a huge succession problem - who are the people who will continue to grow these companies? That's where Search Funds come in.

In exchange for a much smaller equity stake than a typical Founder would have, Searchfunders (as they're colloquially known), take on the lower risk of buying an established company. In a world of higher interest rates, this is an attractive proposition and does not rely on tough-to-access VC money.

If you're interested in reading more, you can get started on your Search Fund journey by checking out:

• Searchfunder, started in the US, is a platform to connect individuals, share experiences and find new companies. Discover events and compare notes.
• Foundy is an end-to-end platform to buy and sell businesses, helping acquirers to find companies for sale and complete transactions faster.

Improving the liquidity among privately-held companies is key to economic growth, and Search Funds will play an important role in that. There's a wealth of capital in Europe, and if more of that is deployed in solving the succession problem, we'll all be better off for it.

Scribe is a private company data platform. We're helping a number of Search Funds to identify both privately-held companies and investors.