Introduction to Entrepreneurship Through Acquisition & Search Funds

Catalog description

While the promotion of tech entrepreneurship has grown substantially in the past 20 years, core entrepreneurship -- small business owner-operators -- are still the vast majority of occurances of running a business. These are not high-profile nor receive the headlines but are the greatest wealth creator in the US economy. In the past 30 years, a variant on this small business owner-operator model has emerged: Entrepreneurship through Acquisition (ETA). ETA takes a small-to-midsized business (SMB) that has achieved some level of product-market fit as well as financial stability and acquires the company putting a new CEO -- oftentimes a newly minted MBA -- in place to drive growth and optimization. Since many SMBs are run as “lifestyle” businesses, the current owner has little incentive to grow them beyond what meets their personal financial needs. This has a dual effect of a) suppressing acquisition multiples (typically 3-6x EBITDA) and b) creating ample opportunities for immediate financial impact under professional management. This creates an attractive asset class for investors which, over the past 30 years, has achieved 3x the returns vs. traditional mid-to-large private equity (PE) and venture capital (VC).