The Surge in Self-Funded Search

In this article, I delve into the evolving landscape of self-funded search.

Self-Funded Search: A Category on the Rise

Since I first entered the search fund space in 2015 with an unknown and new startup called Searchfunder.com, this space has undergone significant growth and evolution. Having been around since the 1980s, the traditional model of a pool of investors mentoring and providing capital for an MBA student to search for and acquire a small to medium sized business was just about everyone’s focus.

I recall when I first heard of the self-funded search model being touted at Harvard as an alternative to the traditional search. The most common reaction I received from new entrants to the ecosystem was “What, you can live off savings or your spouse for two years and buy a business with just a loan!?” It seemed fantastical to those aspiring acquisition entrepreneurs. Back then, the self-funded model and later the accelerators/incubators were always discussed and judged in relation to the traditional search fund model which was the gold standard.

Some may argue that I’m making this call too soon.  But,  based on what I saw and heard at the Self-Funded Search Conference, my guts says that the traction that self-funded search has gained in recent years means it is now establishing itself as a genuine category or sub-niche with its own set of practices and principles. Searchfunder, the Search Fund Coalition, SMBash, SBA lenders, individual investors and many others have played a substantial role in laying the foundation for the explosive growth in aspiring self-funded searchers. However, the Search Investment Group has played an especially pivotal role this year in leading this effort through the launch of the first-ever Self-Funded Search Survey and establishing the not-for-profit Self-Funded Search Association. From these nascent beginnings, I foresee a time in the not too distant future where MBA and Ph.D students in Entrepreneurial Studies will be able to conduct research projects concerning self-funded search.

Diversity and Inclusion within Self-Funded Search

One notable aspect of self-funded search is its appeal to a broad and diverse range of entrepreneurs. The Self-Funded Search Conference had a far more diverse pool of attendees compared to what I see for the traditional model. A remarkable number of attendees of color at the Self-Funded Search Conference expressed their initial hesitation in signing up for this first-ever conference because it would be predominantly a white “boys club,” where they might feel out of place or excluded. However, they were pleasantly surprised to find representation that reflected a wide range of backgrounds, fostering a greater sense of belonging and increasing their confidence levels about whether search funds might be right for them.

An equal number of attendees of color expressed enthusiasm for the self-funded model as a means to build inter-generational wealth, while also providing some much-needed reprieve from the daily experiences of racism, gender bias, and subtle discrimination present in their corporate environments. They were looking forward to building business cultures that reflected their values.

Their obvious relief underscores the potential of self-funded search to address systemic challenges and provide a more inclusive path for entrepreneurs of color and women.

When I entered the search fund community in 2015, I found only one other woman of color in the space operating her business in Africa. For quite a long time, I felt like a one-woman band trumpeting diversity, equity, and inclusion in an empty theatre.  While I hoped that the search fund space would not replicate the systemic issues of other areas of the finance world, I often harbored fears it would.  So, it was a joyful delight to see such increased diversity at the Self-Funded Search Conference, even while recognizing there is still much work to be done regarding diversity, equity, and inclusion in this space. Nonetheless, the gathering momentum of progress augurs well for the investors providing gap funding, the lenders, and the searchers themselves.

In sum, self-funded search is experiencing rapid growth and evolving while  appealing to and empowering a diverse range of acquisition entrepreneurs. The increasing momentum coupled with continued dedication to DEI issues holds great promise for a more inclusive future for this category.