More Than One Way to Skin a Search Fund Cat

“One is the loneliest number”

 --Three Dog Night

I’m writing this article as I ride down to Austin, Texas to recruit searchers to potentially join our cohort at LCP Search Funds.

There are cars everywhere. They’re all going the same direction, generally following the same laws (except that one person who seems to think that the left hand lane is for driving 40 mph), doing the same thing.

Yet, despite being on a highway filled with cars, I’m alone. I’m not alone in the sense that I’m stuck in a room by myself, but, despite all of the people around me, I’m in my own little world.

Searchers experience this feeling, too. They generally start in the second year of their MBA program, researching about what previous search funds have gone through, making the decision, reaching out to some untold number of investors, raising a fund, graduating, and then…

They strap the parachute on, jump out the plane, and are surrounded by relative silence. They have the occasional check-ins with their investors, phone calls with friends and fellow alumni who are going through the same thing, and the long, long dog walks with the spouse to talk about what they did that day.

But, most of the time, they’re on a phone or in front of a computer screen all day (and into most of the night) in an all-consuming quest to find and acquire a company so that they can run it.

According to the 2016 Stanford GSB search fund study, a successful searcher, on average, will spend 19 months in this process before finally closing on a company.

But, only 73% of them actually wind up buying a company. The other 27%?

Even for the ones who graduate from being a searcher to being a CEO, they’re still alone. They’re on top of the mountain, but being on top of the mountain means, within your company, you have no peers. You may have had office friends and work mates before business school, but you won’t get those from your company.

I know. I ran a company. I even had partners, but the dynamic changes when you’re the one calling the shots. A lot of my employees are great people, and I would have enjoyed the social beer with them, but it would never happen, because the dynamic changes when you’re the boss.

Yes, you’ll have a board. You’ll have advisors. They want to help. But, they’re busy people. They have lots of investments and serve on many boards. Their bandwidth is limited, so a desire to help may not always translate into being available for a phone call when you have a burning question.

For many people who want to be searchers, this is all part of the challenge, part of the excitement.

Some answer this problem by forming partnerships. In the aforementioned Stanford study, 27% of search funds formed are partnerships.

We believe that there’s another way to help solve the desire of some searchers to want to own a company but also want to be a part of a team.

That’s the search fund accelerator.

In our view, a search fund accelerator is a group that provides experienced entrepreneurs to a team of searchers to assist them in both the search process as well as in helping the CEOs when they are in charge of the companies they have found and acquired. By providing a cohort of searchers who are all working towards the same goals, the searchers can help each other out in deal flow sharing as well as have a ready-made executive round table once they’re running their acquired companies.

LCP Search Funds is one such accelerator. My partner Dave Slenzak ran a search fund in 2010 and had an exit from the company he bought in April, 2016. I ran a startup from 2005 until my exit in###-###-#### We both know what it’s like to run a company and how to source deals.

Our accelerator is Southeastern U.S. focused (and we’re looking to fill out our 2017 cohort, so please connect with me if you’re interested) and distributed. We believe that it’s in our searchers’ best interest to have economic incentives to help each other out, so we have structured our organization so that the searchers share in each other’s common stock as well as having rights to the profits of the GP.

We believe in teamwork. We will kick off our cohort with a week in a big house in the Outer Banks of North Carolina where we’ll spend a week hanging out, getting to know one another, and laying the foundations for successful searches. Then, everyone will head home and begin their searches from the locations where they think they’re most likely to find the companies that they want to run.

Therefore, we want team players, people who are self-aware and introspective, and who, while confident, think that having a tribe to turn to improves their chances of success.

When talking about search funds, most people talk about the Stanford and the self-funded model, both of which are great for the right people. However, if you’ve been thinking about doing a search, but wished that there was a way to do it in a more team-based and collaborative environment, look at the accelerator model. While we think that our model is a great one, we might not be your cup of tea. There are other accelerators out there, and I’m sure they’ll pop up in the comments and identify themselves.

If you do think that you might be a fit for an accelerator model in your search, we’d love to talk to you. Connect with me here at Searchfunder or shoot me an e-mail at jhull at lcpsearchfunds dot com, and we can talk.

If one is the loneliest number for you, come talk to us and see if six is a better number instead!

About the Author: Jason Hull is a partner at LCP Search Funds, a Southeastern U.S. based search fund accelerator. He previously co-founded and sold a software consultancy and was a tanker in the Army. He's a graduate of the University of Virginia's Darden Graduate School of Business and of the United States Military Academy at West Point.