E182: Pete Seligman: Navigating the World of Search Funds and ETA - Watch Here

About the Guest(s):

Pete Seligman is a search fund investor and entrepreneur based in Australia. With a background in engineering, finance, and project management, Pete brings a diverse skill set to his work. In 2013, he followed his passion for business ownership and acquired a small mining services business, which he successfully grew and expanded over the past decade. Currently, Pete is actively involved in the search fund community, where he supports and mentors aspiring entrepreneurs in their quest to acquire businesses.

Episode Summary:

In this episode, Pete Seligman takes us on his journey from being a business owner to becoming a search fund investor. He shares the process of acquiring his first business and the challenges he faced along the way. Pete emphasizes the importance of self-awareness and finding the right fit when considering entrepreneurship through acquisition. He highlights the value of building a strong network and seeking advice from experienced entrepreneurs. Pete provides insights into the search fund model and its potential for success. He also discusses the qualities he looks for in searchers and the timeline for exiting a search fund investment.

Key Takeaways:

• The search fund model offers a unique pathway to business ownership and investment, providing an alternative option for business owners considering an exit strategy.
• Self-awareness and finding the right fit are crucial when exploring entrepreneurship through acquisition, as it requires a deep understanding of personal goals and strengths.
• Building a strong network and seeking advice from experienced entrepreneurs can greatly enhance the search process, providing valuable insights and guidance.
• Successful searchers possess qualities such as grit, perseverance, and coachability, which are essential for navigating the challenges of acquiring and running a business.
• The timeline for a search fund investment typically ranges from 5 to 10 years, with an average hold period of around 5 to 6 years.

Notable Quotes:

• "The ability to acknowledge the fact that you don't have all the answers and you will trip over and that's okay. And other people will see you trip over and when that happens, it's okay to reach out and ask for help." - Pete Seligman

Article:

The Rise of Search Funds: A Pathway to Entrepreneurship

Key Takeaways:

• Search funds offer a unique opportunity for aspiring entrepreneurs to become business owners by acquiring existing businesses.
• The search fund model has gained popularity globally, with a growing community of investors and searchers.
• Successful searchers possess attributes such as grit, perseverance, coachability, and the ability to build and lead teams.

Introduction

In recent years, search funds have emerged as an alternative pathway for entrepreneurs to become business owners. This model allows aspiring entrepreneurs, known as searchers, to raise capital from investors to fund the search for and acquisition of an existing business. This article explores the journey of Pete Seligman, a search fund investor, and his insights into the search fund space.

The Path to Entrepreneurship

Key Takeaway: Pete Seligman's journey into the search fund space began with a desire for autonomy and accountability.

Pete Seligman's journey into the search fund space began with a desire for autonomy and accountability. After working in various roles in engineering, project management, and investment banking, Pete realized that he wanted to be closer to the action and have a direct impact on the success of a business. He and a friend decided to explore the idea of buying a business rather than starting one from scratch.

In 2013, Pete completed his first acquisition of a small mining services business. Over the next few years, he acquired three more businesses and successfully grew them. However, in 2020, Pete decided to explore a different path and became a search fund investor. He saw the opportunity to be involved in the operating businesses while also helping other entrepreneurs navigate the search process.

The Search Fund Journey

Key Takeaway: The search fund journey begins with self-awareness and a deep understanding of what one wants to achieve as a business owner.

The search fund journey begins with self-awareness and a deep understanding of what one wants to achieve as a business owner. It is a life decision that requires a commitment to the journey and a willingness to learn and adapt along the way. Pete emphasizes the importance of having conversations with other entrepreneurs, investors, and business owners to gain different perspectives and insights into the search fund space.

Once the decision to pursue a search fund is made, there are various resources available to learn about the process. Stanford University, in particular, offers a wealth of information and documents that cover the technical aspects of search funds. However, Pete highlights that the most important aspect is understanding whether the journey aligns with one's goals and aspirations.

Finding Your People

Key Takeaway: Networking and building relationships within the search fund community are crucial for aspiring searchers.

Networking and building relationships within the search fund community are crucial for aspiring searchers. There are various platforms and events where searchers can connect with other like-minded individuals. Searchfunder.com is a popular website that connects searchers globally. Additionally, keeping an eye on LinkedIn and industry conferences can help identify key individuals and communities within the search fund space.

In Australia and the Asia-Pacific region, Pete has been actively involved in building a local network through events like the ETA Forum. These events provide an opportunity for searchers, investors, and entrepreneurs to connect and share insights. Additionally, smaller local communities and catch-ups in different cities offer a more intimate setting for networking and learning from others in the search fund space.

Attributes of Successful Searchers

Key Takeaway: Successful searchers possess certain attributes that contribute to their success in the search fund space.

Successful searchers possess certain attributes that contribute to their success in the search fund space. Grit, perseverance, and coachability are key qualities that enable searchers to navigate the challenges and uncertainties of the search process. Pete highlights that backgrounds in high-performance sports, the military, or family businesses can provide valuable experience and skills that translate well into the search fund journey.

The ability to build and lead teams is another crucial attribute for searchers. Many businesses that search funds acquire have reached a team threshold that the previous owner couldn't surpass. Searchers must have the skills and mindset to build and grow teams to take the business to the next level. The willingness to learn and ask for help is also essential, as searchers often encounter new challenges and need guidance from experienced investors and mentors.

The Timeline and Exit Strategy

Key Takeaway: The typical timeline for a search fund is between five and ten years, with the average hold period falling around five to six years.

The typical timeline for a search fund is between five and ten years, with the average hold period falling around five to six years. However, the actual timeline can vary depending on the specific circumstances and goals of the searcher and investors. The searcher's carry, or equity stake, is often tied to the exit, providing an incentive to achieve a successful outcome.

While the general intention is to exit within the targeted timeframe, there is flexibility for searchers and investors to make decisions based on the business's performance and market conditions. Some searchers may choose to exit earlier if they achieve their target returns, while others may decide to hold the business for a longer period if it proves to be a successful cash flow generator.

Conclusion

Search funds offer a unique pathway to entrepreneurship, allowing individuals to become business owners by acquiring existing businesses. The journey requires self-awareness, perseverance, and a willingness to learn and adapt. Building a network within the search fund community is crucial for aspiring searchers, as it provides support, guidance, and opportunities for collaboration.

Successful searchers possess attributes such as grit, coachability, and the ability to build and lead teams. The timeline for a search fund can vary, but the general intention is to exit within five to ten years. However, the actual timeline depends on various factors, including the business's performance and the goals of the searcher and investors.

As the search fund space continues to grow globally, it presents opportunities for both entrepreneurs and investors. By fostering a vibrant marketplace and educating business owners about the search fund model, we can create a more dynamic and successful ecosystem for entrepreneurship through acquisition.

---- MORE COOL STUFF ---

Are you ready to take your podcast listening to the next level? Subscribe to "DEEPER by How2Exit" newsletter and never miss out on our latest episodes. Join our  newsletter  HERE

Want to stay in touch with what's happening in the Main Street M&A Space?  Subscribe to Growth & Acquisitions(Formerly The Hub)