What is a Search Fund?

If you are an investor or a business owner, you may have heard of "search funds". But what exactly are they, and why are they gaining popularity, especially in Spain?

Search Fund Definition

A search fund is a specialized investment structure whose primary objective is the search, acquisition, and management of an existing company. Originated in the 1980s at the Stanford Graduate School of Business, this model allows aspiring entrepreneurs to seek financing from investors to acquire a company and then operate it. Although initially focused on MBA graduates, results have increasingly shown that entrepreneurs with extensive industry experience tend to achieve better average outcomes.

How does it work?

Search and Financing: The entrepreneur seeks investors to finance operating expenses during the period of searching for a company to acquire. This period can last between 1 and 3 years.

Acquisition: Once a target company that meets certain criteria - such as financial solidity, growth potential, and an attractive market - is identified, the entrepreneur requests additional financing from the same investors (or new ones) to complete the acquisition.

Operation and Growth: After the acquisition, the entrepreneur takes on a leadership role in the company, aiming to improve its performance, growth, and value.