A search fund is a vehicle that allows an entrepreneur, typically a recent business school graduate, to raise capital to search for, acquire and operate a single privately-held company—usually a small to medium-sized business with strong fundamentals and growth potential.
How the search fund model works
Investors commit capital in two distinct phases. During the search phase, which typically lasts 18 to 24 months, investors provide funding to cover the entrepreneur's salary and search-related expenses. Once a suitable company is identified, the same investors have the right, but not the obligation, to participate in the acquisition financing. The entrepreneur, known as the searcher, typically receives equity in the acquired company as compensation for leading the search and subsequently managing the business.
Search fund vs private equity
Whilst both involve acquiring and operating companies, search funds differ from traditional private equity in several ways. Search funds are led by individual entrepreneurs rather than established investment firms, target smaller companies (typically under £10 million in enterprise value), and focus on a single acquisition rather than building a portfolio. The searcher often becomes the CEO, providing hands-on operational leadership rather than the oversight role typical in private equity. For investors, search funds offer exposure to entrepreneurial talent and smaller market opportunities not typically accessible through traditional fund structures.
