Building a plan to launch
How should you go about the months leading up to your search?
Today, I’ll take a closer look at the months leading up to raising search capital to help those who might be 4-6 months out. I’ll provide five areas to work through in your preparation that helped me close fundraising in one month: experience, focus, networking, differentiation, and action. I cannot thank enough the countless searchers I had the opportunity to talk with last summer as I got ready to fundraise. These insights come primarily from those conversations.
In this post, I assume you are already up to speed on ETA-related coursework, have a good idea of whether you’ll go partnered or solo, and strongly prefer a particular search model. If not, no worries – please refer to the Educating yourself on ETA post and this A.J. Wasserstein article if you’d like a high-level view of planning for a search fund during your MBA. For those not attending business school, who are pursuing a search well after your MBA, or who didn’t take a course in Entrepreneurship Through Acquisition, these tips should still be of value to you.
Experience
Leading a successful search fund requires many skill sets. Think of how different the stages of the fund are; fundraising, searching, transacting, operating, and exiting all require unique skills you will undoubtedly need. Although you will learn many of those skills on the job, doing so without addressing your weaknesses will inevitably be detrimental to your success. Further, you’ll need to demonstrate to investors and others in the community that you are serious about pursuing a search fund, and doing nothing in preparation won’t get you far.
Regarding experience, my advice is to find your knowledge gaps and attack those. Evaluate your work and extracurricular experiences to determine where your strengths and weaknesses are. You should have a good sense of this if you are in business school and already working towards addressing these gaps, but bring it under the context of running a search fund and, subsequently, a small business.
Do you have a financial services, consulting, or private equity background? Consider getting some operating experience at a small business, ideally at a company led by a former searcher. Structurally, working as an investor or advisor is entirely different from the day-to-day at a small business, and you must become comfortable with what you’re getting into. In addition, gaining an internship at a searcher-led business will help you learn in various functional areas that help organizations create value and get you away from an Excel spreadsheet.
Do you have a background in general management or operations? Focus on gaining sourcing and investing experience at a search fund or private equity firm focused on lower-middle markets. Ideally, you’d like to intern at a fund that will most closely resemble the search model you are pursuing. Where you may be more comfortable with growing revenues and driving efficiencies through cross-functional support, the idea of selling or structuring a deal might be a bit foreign. Learning what makes for a good investment is crucial. Coursework can help a lot in gaining a more thorough understanding of acquiring a business, but working with a searcher first-hand will provide you with the knowledge and confidence to do it independently.
Ideally, gaining internship experience at multiple search funds and operating companies would benefit you as you prepare. However, don’t go too overboard. The clock is ticking during your MBA to make a career decision, and you will need to commit fully at some point. You also need time to enjoy being in school. There are tradeoffs between gaining experience and moving forward with your search preparations, but recognize how much you’ve accomplished until this point. Prioritize those critical risks of yours and tackle them directly.
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