Search fund

Most people who want to buy and run a business do not have the capital to do it alone. A search fund solves that by pooling money from investors who back the search itself, not just the eventual purchase — the entrepreneur gets paid a salary to look full-time, and investors get first access to fund the acquisition once a target is found.

How the two-stage structure works

• Search phase: investors fund a modest budget — salary, travel, professional fees — while the entrepreneur sources and evaluates targets, usually over one to two years
• Acquisition phase: once a target is under agreement, the same investor group, often joined by new ones, funds the purchase, combining equity and debt
• The entrepreneur takes founder equity, often vesting over several years, on top of any capital they personally invest
• Investors who backed the search usually get the right of first refusal to invest in the acquisition, plus preferred return terms

Traditional versus self-funded search

A traditional search fund raises outside capital for both phases and follows a fairly standardized template used across North America. A self-funded search covers the search phase from personal savings or part-time work, then raises acquisition capital only once a deal is found — the entrepreneur keeps more equity but carries more personal risk along the way.