EP23 A look at the SearchFund Model with a Private Equity group Search Fund Partners Jim Edmunds

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Jim Edmunds worked in business development for a retailer before graduating from business school. He  holds an MBA from Stanford Graduate School of Business and an A.B. from Harvard. In 2004, he worked for a search fund with someone he had worked with on Wall Street after business school. Eventually, they bought a portrait studio business in the Midwest. A guy named Rich Kelly, who was the lead investor in his deal during the Lehman Brothers recession, asked him to join search fund partners in 2008. Since then, he has been working at SearchFund Partners.

Search Fund Partners is a small private equity fund that invests exclusively in traditional search fund entrepreneurs. In the past 15 years, Jim has served on the boards of 15 or 20 companies, and has worked with awesome entrepreneurs and built some pretty exciting companies.

Episode Highlights:

    • Jim talks about how the search fund model world looked in 2018 when he was starting his career.
    • His explanation of why the model differs now from what it was a few years ago is insightful.
    • There was a time when CEOs were not required to have a Ph.D. in computer science to run a company.
    • He describes how their company differs from other search funds.
    • With a traditional search fund model, an entrepreneur has an opportunity to earn up to 25% if it’s a single search of the upside and 30% if it’s a pair.
    • The search fund business is pretty steady as it goes. Your survival is independent of getting a big new sale or making huge decisions.
    • The main thing they are looking for is a great product that could benefit from a little extra marketing and sales investment, which many very successful small business owners may be happy with what they have built and not want to invest all the time and energy in taking it to the next level of their company.
    • Taking people who have gone to business school and have learned about KPIs, metrics, and measurement is one of the reasons why search funds have been successful.
    • They want to build companies with an incredibly strong culture where employees feel appreciated, valued, and recognized for their performance. They’ve had a lot of success by paying close attention to culture, and it all starts at the top.
    • A search fund may be the right choice for you if you’re willing to take the risk, and you’re interested in building a small business, building teams, and helping people develop, and having wide control over your destiny.
    • The risk of search funds is real, but the skills you gain from doing it right will benefit you and your career, regardless of whether you are successful on your first deal.
    • They host an event for active searchers and CEOs every year where everyone they work with is invited.
    • Describes the difficulty of finding a company back in 2007 to 2008, then covid hits in 2020, his partners and he expected a repeat experience of 2009, but it turns out the opposite happened.
    • Jim explains how search funds work, which was hard to learn a while back but is much easier now since all the information is available online.
    • As for their three to five-year vision, they’ll maintain the same playbook they have exemplified over the years in supporting good entrepreneurs and resilient businesses.  For as long as private equity is booming, there’s gonna be a demand for small companies with great managers that reach a certain threshold.
    • His inspiration comes from his love of working with people. People who are willing to take a chance on themselves, who are open to taking the less conventional route. He finds these people very exciting and dynamic, and he just feels lucky that his life is filled with them.

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