Buy or build? A primer on European Search Funds
By Rob Cossins on the 8th February 2024Private Equity
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.