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Search Funds: A Financing Option for Business Buyers Search funds seek out opportunities to acquire.

By Gwen Moran Edited by Frances Dodds

Opinions expressed by Entrepreneur contributors are their own.

When Jim Southern wanted to buy a company in the 1980s, he didn't use his savings or look for loans. Instead, he sought investors for a search fund--a pool of money that helps aspiring entrepreneurs find viable businesses to acquire. Southern ultimately purchased a printing company that he held for approximately 10 years before selling it.

Today, Southern is founder of Pacific Lake Partners, a San Francisco firm that helps entrepreneurs acquire businesses using a two-stage search-fund model: providing money for the search, then assisting with the acquisition. Pacific Lake typically works with recent business school graduates, making available, along with other investors, up to $500,000 to help them find the right opportunity. Once a business is located--usually one in the $10 million to $30 million range--the firm will provide up to $2 million for the purchase.

"The typical search-fund entrepreneur has chosen his investors well," Southern says. "He doesn't have the money himself, but he does have a stable of investors who have been communicating with him for up to two years during the search."

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