Stanford Business School graduate, Edward Silva, adopted an innovative model for entrepreneurial success. Instead of creating his own start-up, he decided to buy an existing company using a concept known as search funds, which he was introduced to during his studies.
The model, providing a vehicle to raise capital for acquiring pre-existing firms, proved to be attractive to Silva. Despite the initial hurdle in garnering investor interest, he managed to secure sufficient financing. Subsequently, he plunged into finding potential companies for takeover, eventually laying his hands on a promising software firm.
Under Silva’s savvy leadership, the acquired company has seen enhanced growth and increased profitability. This experience serves as a compelling case for the search fund model’s potential for recent graduates.
The direction Silva took deviates from his initial idea of launching a tech startup.
The concept of search funds, or collective investments betting on talented individuals, was too enticing to resist. Instead, Silva envisaged kick-starting a business that could exploit the untapped potential of such promising talents.
Generating more than $30 million in search funds, Silva managed to acquire MásLabor, an employment visa consultancy service, in July 2021. This acquisition, facilitating his entry into the consulting sector, marked a significant milestone in his journey and underscored the efficacy of the search fund model.
Search funds dates back to over four decades
The idea of search funds, dating back to over four decades, is witnessing renewed popularity among young entrepreneurs, especially those holding MBA degrees. These individuals offer enticing funding ideas to investors while promising high returns through the acquisition of already established businesses – reducing startup risks.
Notably, about a third of all search fund money, nearly $800 million, was amassed in 2020 and 2021, a significant increase from previous years. This rising trend highlights the broadening recognition and significance of this sector, which is attracting increased resources and attention.
The success of search funds, traced back to its inception in 1984 with H. Irving Grousbeck, can be credited to the robust entrepreneurial-investor relationships. Entrepreneurs seek not only monetary contributions from investors but also their mentorship and strategic inputs. This model is gradually gaining traction outside North America, in regions like Europe and Asia, reflecting the evolving entrepreneurship landscape.
