Traditional Search - Can I just drop out and return capital?

searcher profile

July 23, 2024

by a searcher from University of Illinois at Urbana-Champaign - College of Business in Austin, TX, USA

Has anyone gone with the Traditional Search Fund approach, and later dropped out after raising capital for the Search Phase?

Meaning, you raised capital, then after 6 months or so, decided it wasn't for you, and returned the remaining capital to investors.

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commentor profile
Reply by a searcher
from INSEAD in Singapore
Thanks for the tag @Luke Tatone. I've just started raising, so not best to comment - but it's great to see the community rally around you with offers of help.

My advice is to step-back - get away from it all, preferably onto a nice beach(!), and reflect. You're clearly talented, especially having raised a fund, and so I'd look to understand what's changed vs 9 months ago?

Being a searcher is tremendously tough. It can be a lonely place, which is not helped by brokers, sellers, and others who are happy to take Searchers for a ride. A corporate job can sound quite enticing by contrast.

However, you also have a unique opportunity - if you find a company, to effect change, improve the lives of employees and the wider community, and hopefully make a lot of money too! So give yourself time to understand where your heart is truly at - and if it's away from searching, then it sounds like the community will be able to help you. Either way, best of luck!
commentor profile
Reply by a searcher
from University of California, Los Angeles in Santa Monica, CA, USA
Yes, you can drop out of a traditional search fund and return the remaining capital to investors. Here's what you need to consider: Communicate with Investors: Be honest and clear about your decision and reasons.
Check Legal Agreements: Review your agreements to understand the process and any penalties.
Assess Remaining Capital: Determine how much unspent capital is left to return.
Consider Relationships: Think about how this might impact your reputation and future opportunities.
Document Everything: Keep records of all communications and transactions for transparency.
While it's not common, some search fund entrepreneurs have done this when they realized it wasn't the right fit. Make sure you think through the personal and professional implications.
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