MBA Grads Exploring Search Funds for Fast-Track to CEO Roles

Last Updated on March 29, 2024 by Robert C. Hoopes

The Decline in Startup Growth Spurs New MBA Grads to Consider Alternative Paths

Despite the booming trend of new small business starts, the startup field is currently experiencing a decrease in growth. Investments in startups have dropped from $242 billion in 2020 to $170 billion in 2021, prompting new MBA graduates to explore alternative paths to entrepreneurship.

One such alternative gaining popularity is the practice of starting a “search fund” to acquire an existing business. This strategy allows entrepreneurs to raise a pool of money from investors, enabling them to search for and acquire a company to run as CEO, even with limited experience in running a business. This approach is even being taught in top business schools as a viable career option for recent graduates.

Typical acquisition targets for search funds are profitable companies with recurring revenue in the $5 to $10 million range, such as landscaping, waste management, or HVAC companies in smaller cities. While some may see this practice as a shortcut to entrepreneurship, searchers aim to provide a smooth transition for retiring small business owners by taking over their companies and promoting longevity.

What sets search fund entrepreneurs apart is their motivation to lead and grow a company, rather than a specific passion for a particular industry or product. This new path for aspiring CEOs highlights the evolving nature of the business landscape and provides an alternative route for MBA graduates looking to make their mark in the business world.

As the startup field continues to face challenges, the rise of search funds offers a promising opportunity for new MBA graduates to consider as they navigate their career paths in the business world.