Search Funds, Business Angels and Your Post-MBA Career
As a potential or current MBA graduate, you’ve probably done considerable research into what you can do with yourself after you finish your degree. But there is a small and relatively untapped pool of opportunities for outstanding graduates that has been growing recently, and it involves partnering with ‘Business Angels’ and creating something called a ‘Search Fund’.
Business Angels, if you’re unfamiliar with the term, are smaller, usually private investors who will club together to provide venture capital for a new business. Think of them as friendly ‘Dragons’ (alaDragons’ Den). A search fund works by using about ten Angels to back an MBA candidate in researching and finding a suitable fledgling business for a management buy-in, and a quick exit only a few years later.
The MBA, guided by their Angels and tutors, will perform market research in order to identify a suitable candidate business. Once one is found the MBA is installed as the executive in a management buy-in, and the capital from the Angels used to grow the business. It sounds extremely risky, but the average IRR for search funds in the UK is around 22%, and this goes up to about 32% on US soil.
A typical case would be Simon Webster, who was approached to start a search fund while studying at London Business School. After a search of two years he eventually identified a clinical prosthetics business with predictable revenue streams and strong management. Once the business was identified he raised £3m and bought into it. Over the next 12 years he grew the business tenfold, wrote his own ticket and the Angels achieved an annualised IRR of 20%.
If you’re looking for a less conventional career path after your MBA, which many graduates now must do, then partnering with a search fund might be an incredibly lucrative and exciting option.
Labels: SEARCH
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