Article in Today's WSJ on Search Funds

March 21, 2022

by a searcher from University of Chicago in Chicago, IL, USA

Thought this article might be of interest to searchers or friends/family/investors as it might add credibility to raising a fund. Personally, I was a little surprised about the $500,000 search fund amount as that seems roughly double what I would have expected for two years of searching...would appreciate any insights others have!

https://www.wsj.com/articles/m-b-a-s-latest-pitch-investors-startup-business-school-spac###-###-#### ?mod=itp_wsj&ru=yahoo

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Reply by a searcher
from Northwestern University in Chicago, IL, USA

Rather than look at a top down I would say think about it from a bottom up perspective. Most times searchers will take a salary of around $100-125K. Spread that across two year ($250K) then that leaves only $250K for legal fees, other operational costs (office space, software, accounting firms, and then you should plan assuming that you will have a deal that you have spent some serious money on blow up. Which advisors fees on a deal could easily run $100-150K when you bring in compliance, commercial, HR, IT, and any other diligence advisors. So add that all up and you get to ~$500K. I also know a number of partnered searches that raise quite a bit more (beyond just another salary) so as an average this seems fair and almost necessary to be able to conduct the professional quality search investors are looking for.

Reply by a professional
from The University of Chicago in Chicago, IL, USA

That size for a traditional search fund is not inconsistent with what we see in traditional search funds. These days, traditional search can be feast or famine. If you get a few known search investors to cut a check, a lot of people line up behind them, but you might struggle without that stamp of credibility (from the investor community, that is). At that point, the search fund size might not be as much about what you need for funding the search as it is also about securing the right syndicate to go after deals. Additionally, traditional search acquisitions are getting much larger so a benefit of having deeper pockets in the search is the ability to hunt larger deals.

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