A searcher (or a team of two searchers) raises $350-700K from 10-20 investors to finance the search for a company to acquire. Uses of this capital generally include the searcher’s salary along with search-relevant administrative, travel, and transaction-related expenses.

The searcher embarks on a journey to identify and acquire a company. The searcher identifies deals, negotiates terms, performs due-diligence, sources debt financing, secures equity commitments, and plans for post-transaction transition. Investors in the search fund receive a 50% step-up on search contribution and a right of first refusal to invest pro rata in the acquisition via preferred units.

The searcher takes a leadership role in the acquired company. 2-4 investors join the Board of the company to provide mentorship, guidance, and governance. The searcher, supported by the Board, immerses himself or herself in the business during the first year post-transaction. Primary goals for the first year are to build trust among all stakeholders and to cement understanding of the business. Later, the searcher contemplates and implements one or multiple value creation strategies, such as operational efficiency improvements, sales and marketing investments, market expansion, or even add-on acquisitions.

Over the course of the operating phase, the searcher will evaluate exit alternatives to ultimately deliver liquidity to investors. Liquidity events can occur through a number of avenues, including an outright sale of the company, a debt or equity recapitalization, or even an initial public offering. At the time of a significant liquidity event, the searcher receives up to 30% of the upside based on performance and time-horizon hurdles.