What Is a Search Fund and How Does It Work?

The search fund revolution

The traditional startup narrative—where a founder builds a company from scratch—is increasingly being rewritten by a quieter, more strategic playbook: buying an existing business and scaling it as an owner-operator. At the heart of this movement lies the search fund. While still niche compared to private equity or venture capital, search funds offer a compelling, capital-efficient path to entrepreneurship. But what is a search fund really, and why is it gaining traction among MBA graduates, career switchers, and even institutional investors?

The search fund model emerged in the 1980s at Stanford Graduate School of Business and has since evolved into a structured investment vehicle that sits at the intersection of private equity and founder-led operations. Unlike traditional funds that back multiple companies, a search fund focuses all capital, time, and execution risk on a single acquisition. For the right individual—often called the "searcher"—this isn't just about financial engineering. It's about full operational control.

The rise of search funds coincides with a global generational shift—and Southeast Asia is no exception. In Singapore and Malaysia, thousands of SME founders are approaching retirement without succession plans. This presents a once-in-a-generation opportunity to acquire stable, cash-generating businesses at reasonable multiples—and to build wealth through sweat equity rather than moonshot ideas.

Search Funds vs Private Equity: Understanding the Structural Differences

At first glance, a search fund may resemble a private equity fund. Both raise capital from limited partners (LPs), conduct due diligence, and aim to create returns through company growth and eventual exit. But the structure and strategic intent differ in critical ways.

Whereas PE funds deploy capital across a diversified portfolio, search funds focus on acquiring one company. This creates concentrated risk but also deeper alignment. A PE partner may sit on the board; a searcher often becomes CEO. This distinction matters in execution—private equity funds typically drive value creation through top-down financial controls and board governance, while searchers live the business day-to-day, building teams, refining operations, and executing growth firsthand.

Fund size is another divergence. Most search funds raise between USD $300,000 to $600,000 for the initial "search phase," and later secure $2 to $10 million for the acquisition itself. In Southeast Asia, this is increasingly feasible as capital becomes more accessible through family offices, angel syndicates, and operator-investor networks. In Singapore, MAS regulations and a growing secondary market for SMEs have added momentum.

The businesses targeted also differ: search funds pursue companies with $1 to $5 million in EBITDA, while PE shops hunt for larger, scalable assets with institutional readiness. This aligns well with the SME landscape in Malaysia and Singapore, where many businesses generate steady cash flow but lack succession planning or digital transformation.

The Search Phase: Raising Capital and Finding the Right Business

The initial phase of a search fund is aptly named: the searcher raises a small fund from 10–20 investors to cover living expenses, sourcing tools, and diligence costs over a two-year window. This stage is as much about trust and storytelling as it is about spreadsheets. Investors back the individual, not a thesis.

Searchers typically follow one of two models: traditional or self-funded. In the traditional model, capital is raised upfront and LPs are offered pro rata rights in the eventual acquisition. In the self-funded model, the entrepreneur uses personal funds or deferred compensation to avoid dilution, with financing only introduced at acquisition. While the former offers more support and signaling, the latter maximizes ownership—albeit with higher personal risk.

This model is now gaining ground in Southeast Asia, especially among returning MBA grads, former MNC operators, and younger professionals looking for mid-career pivots. Searchers are increasingly sourcing capital through regional syndicates, angel investor groups in Singapore, or even platform investors in Jakarta and Bangkok.

The search itself requires relentless sourcing, outreach, and screening. Most targets fall in fragmented, low-tech industries like logistics, education, facilities management, healthcare services, or industrial trading—sectors with recurring revenue and owner-dependence. In Singapore and Malaysia, aging founders and thin succession pipelines make these sectors especially attractive.

Acquisition and Operation: Becoming an Owner-Operator

Once a target is identified, searchers lead negotiations, financing, and transition planning. The typical acquisition is structured with a mix of equity and seller financing or SME debt. While the U.S. has SBA loans, in Southeast Asia, buyers often negotiate installment-based earnouts or seek bank loans with personal guarantees—common in Singapore's tight credit environment or Malaysia's development bank ecosystem.

Post-acquisition, the searcher becomes CEO—sometimes overnight. This is where the true differentiation from private equity lies. Value creation comes not from financial levers, but from day-to-day operational improvement. From pricing strategy to sales hiring, from ERP systems to margin tracking, the searcher is the decision-maker. They must quickly earn the trust of employees, maintain customer continuity, and uncover growth levers.

In Singapore's hyper-competitive labor market and Malaysia's low-tech SME backbone, searchers often face hurdles in digitizing legacy operations, formalizing HR, or creating performance metrics. But with strong execution, these very inefficiencies become the source of upside.

That said, the upside can be significant. Searchers who double EBITDA over five to seven years can generate life-changing returns, especially if they own 20–30% of the equity. For investors, the alignment and transparency of a single-asset strategy can be compelling—provided the operator is capable.

The Exit: Strategic Sale, Buyout, or Continuation

Exits in search funds are typically long-dated. Most investors expect a holding period of 7 to 10 years, though some exits occur earlier if strategic buyers or PE firms make attractive offers. Common exit routes include:

Strategic M&A: Selling to a regional player expanding in Southeast Asia.

Private Equity Recap: PE firms are increasingly acquiring professionally run SMEs in Singapore and Malaysia.

Secondary Sale to Another Searcher: A growing trend, especially in the U.S., that may emerge in SEA as the searcher pool expands.

Unlike VC or PE funds, IPOs are rare. Most search fund businesses operate in fragmented, local markets—not tech-driven, scalable verticals attractive to public markets. However, trade buyers in Southeast Asia—including family conglomerates and regional SMEs—are active in consolidating niche markets.

The future of search funds in Southeast Asia

Search funds sit at the crossroads of entrepreneurship and investment. They are not for everyone—capital constraints, operational stress, and emotional risk are all real. But for a growing class of operator-capitalists in Southeast Asia, they represent a deliberate alternative to the binary path of founder or investor.

What makes this model compelling is not just its capital efficiency or attractive return profile, but the human alignment it creates. Investors are backing a person, not just a deal. Operators are betting on themselves, not a macro trend. And the acquired companies—often family-owned and culture-rich—get a second life through thoughtful stewardship.

As awareness grows across Singapore, Malaysia, and other SEA markets, search funds may remain niche—but not irrelevant. In a region where SME succession is a ticking clock, the operator-led acquisition model offers a new answer to an old question: who will run the business when the founder steps away?