I have lost count of the number of times I have heard executives and investors say “the person creates value, not the idea or deal”. But then, the behaviours displayed are very much focussed on assessing whether the idea is the right one, or the deal is a good one.
What if we invested in the Person first, not the Deal? That is, we turned everything on its head? That’s what Search Funds do!
Search Fund Investors put their money where their mouth is and assess one thing – is this the person I want to run a business that I have a share in? And if I can find that person, why wouldn’t I help them buy a business and run it and expect them to create value for not just themselves, but also the investors and the employees.
It’s definitely not just talk! Search Fund Investors who provide the initial Search Capital to an Acquisition Entrepreneur may wait two years before that person finds the right business to buy. It is definitely patient capital!
Search fund equity investors typically consist of high net worth individuals, successful business owners, Search Fund focussed private equity firms as well as family offices. Over the past 8 years, 75% of search fund investment capital has come from the top 25% of investors (https://www.searchfund.org/).
Search Fund Investing isn’t for everyone. The best Search Fund Investors:
- Believe in patient capital; this is not a short-term in/out deal;
- Believe that finding the right person is more important than finding the right deal; and
- Bring more to the table than just capital; they bring their advice, support and networks because they want the entrepreneur to be successful.
Why are these investors attracted to Search Funds? In part, it is absolutely the financial returns. But it is also more than that, it is being part of a community focussed on assisting talented entrepreneurs grow value.
So what characteristics do we look for in potential Australian Acquisition Entrepreneurs? That is something that my business partner @Ak Sabbagh have gathering information and contemplating for the last six months. Our Aussiepreneurs have seven key characteristics:
- They do the hard work, and stick at it when it gets tough
- Focus on progress, not perfection
- Build relationships with people outside their organisation and aren’t afraid to ask for help
- Are clear about success and know when to pivot, change direction and or get out
- Learn constantly from what is happening, both things that are going right as well as wrong
- Don’t take themselves seriously, they enjoy the challenge
- Are driven by a set of core values to improve not only themselves, but the place they work and the world they live in
Would you invest in someone who had all these?