This year Booth students have an exciting new career opportunity that combines investing, entrepreneurship and management through a new search fund program called Booth Search. As one of the first established programs of its kind, Booth Search will provide graduating students with access to the capital, mentorship and resources necessary to acquire and grow small businesses and, in the process, generate returns for alumni investors.
A search fund is a form of entrepreneurial private investment where recent graduates of elite business school programs work to identify and acquire small businesses, with funding primarily provided by a network of alumni and high net worth individuals. Once the transaction is consummated, the search fund entrepreneurs transition from executing the transaction to managing the business. They then work to grow the acquired companies with the intent of realizing a return for the investors through a liquidity event, usually in the form of a sale of all or part of the company.
The search fund model was first pioneered in 1984 at Stanford GSB. Since then, more than 130 search funds have formed, earning investors returns comparable and often superior to those of private equity investments. According to a 2011 study produced by the Stanford Center for Entrepreneurship, average returns were 37 percent across 79 search funds responding to the study.
Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance Professor Steven Kaplan has been instrumental in fostering alumni investor support for Booth Search. Kaplan compares the search fund concept to "putting seeds in the right places and allowing things to grow naturally." Booth Search aims to do just that, and Kaplan adds that "alumni have been interested in this type of investment for a long time. I am very pleased to see this program taking shape this year."
Leading the charge to take Booth Search from concept to reality is Alex Hodgkin, a Weekend MBA student who has a family and full-time job in Denver, Colorado. Hodgkin first learned of the search fund concept while working at Headwaters Merchant Bank, a firm founded by two Stanford GSB graduates with deep ties to the Stanford search fund network. Through these contacts Hodgkin learned firsthand about the vast potential of the search fund model. When another partner at the firm and Booth graduate volunteered to be a mentor and investor for a similar search fund program at Booth, Hodgkin began spreading the word and leveraging the Booth network to build momentum for Booth Search. Through his efforts and the support of Professor Kaplan, more than 20 alumni investors are now involved and the number continues to grow.
Students interested in learning more about Booth Search and how to get involved are encouraged to attend a panel discussion between Alex Hodgkin and several founding member alumni who have experience in both raising search funds and investing in search funds. Details on the application process will be discussed in the meeting, and applications will be due around early Feb. 2014. The panel will be held on Oct. 30 from 12:00 – 1:30PM. Further details will be available through the BETA Group prior to this event.