What it takes to be an effective and impactful search fund director

The search fund community needs hundreds, if not thousands, of new, qualified, values-aligned directors in the next 3-5 years! Can you help close the gap?

The search fund model, which has generated returns in excess of 30% IRR and 5x MOIC since the 1980s, has always relied on pairing talented but inexperienced entrepreneurs (Searcher-CEOs) with patient capital, mature businesses, and experienced investors and directors who are willing and able to provide coaching, guidance and mentorship. While the traditional search fund model has evolved and now includes accelerators, entrepreneur-in-residence programs, self-funded searches, holding-company vehicles, and global geographic expansion, the basic premise of facilitating partnerships between young, inexperienced CEOs and seasoned directors who can help guide their journeys remains intact and central to its ongoing success.

Today, Search Funds are proliferating, and what was once an obscure post-MBA career path has become more mainstream. Extrapolating from recent industry studies, and using some conservative assumptions, more than 2,000 director seats will need to be filled in the next year or two, globally. Even if every experienced Search Fund director sat on 3-5 boards each (which many cannot due to other obligations) the search community would need hundreds of new directors, just to cover imminently available seats.

If search funds continue to proliferate at the current rate (+40% year-on-year growth), the demand for good directors will only increase and, unless we can influence supply, the shortage of directors will grow, and the bedrock principle of what makes search funds so special - the mentorship of seasoned directors - will be harder to maintain. As a result, historically high returns may suffer.

The looming threat posed by this growing director scarcity is why I’m pleased to publish this note with Yale School of Management's ^redacted‌ on the topic of what it takes to be an effective and impactful director of a search fund-acquired company.
https://yale.app.box.com/s/sb31v8vriz1fiknuat1lvk87oq3yj6ih
This work is a first step in building more director-facing content & resources for the search community, so anyone interested, qualified and willing, can explore getting involved - and, if they do, be better positioned to perform better, faster.

So, if you’re a new or aspiring director of a search fund-acquired company - or a seasoned veteran or Searcher-CEO - please read this first case note, and consider taking this survey (https://lnkd.in/d4K-P9uJ) to inform what types of content or resources we can work on next for the benefit of the broader search fund community. ‌