Businesses Purchased for Growth Strategy Gains Traction
Embrace a fresh business endeavor sweeping through India - , known as search funds. Originating in countries like the US, Spain, Brazil, and Japan, this strategy is now garnering attention from Indian professionals.
Rather than building a company from the ground up, search funds focus on acquiring established, profitable businesses. Despite the infant stage of search funds in India, there's an encouraging sign of a budding movement ahead. According to industry estimations, around 10 search funds are currently operating in India, with three on the hunt for their next acquisition, three actively raising capital, and four gearing up for their fundraising soon.
Anurag Sinha, founder of Milestone Search Capital, is one of the early adopters of this innovative approach. Sinha, a seasoned CEO with a successful track record in the mid-sized company sector and a former executive at hospitality giant Oyo, is on a mission to find the perfect company to acquire under the search fund model. Milestone Search Capital, in partnership with esteemed global investors such as Will Thorndike, Tycen Bundgaard, and Pawan Danwar, is currently reviewing over 50 businesses in their search.
Investors find search funds alluring due to their low-risk, high-potential nature. Venture capitalists, like Vikram Gupta of IvyCap Ventures, appreciate that the businesses being targeted are already established with recurring revenue, strong customer loyalty, and minimal growth capital requirements. This mitigates the early-stage risks, making the model particularly appealing to investors on the hunt for promising opportunities.
Seasoned operators like Rehan Netarwala, founder of Okintek Capital, also find the search fund model appealing. With a successful track record in creating Savage & Palmer, an outsourced accounting firm serving over 500 Indian SMEs, Netarwala discovered the search fund model as the ideal blend of investment and operation. Okintek Capital raised a ₹200-crore fund to acquire a high-quality SME, boasting institutional backers, experienced CEOs, family offices, and international search fund leaders.
Search funds offer flexibility to investors, as they only commit a range of funds, with capital drawn only once a suitable acquisition is found. This unique combination of entrepreneurial spirit, low-risk investment, and flexible fund commitment scheme is paving the way for search funds to challenge traditional entrepreneurial pathways in India.
The search fund model also presents a structured exit strategy for family-owned SMEs navigating succession challenges. For these businesses, search funds provide a long-term, committed operator that can preserve and enhance their legacy.
As search funds establish themselves in India, they are poised to reshape the entrepreneurial landscape, offering Indian professionals a unique path to business leadership and growth. The model's potential, especially in a thriving Indian economy ripe with opportunities in sectors like technology and fintech, is immense. Only time will tell how far this distinctive approach to entrepreneurship will go in India.
Sources:[1] Various Sources[2] India Economic Summit, World Bank Group, 2020.
- Investors such as Vikram Gupta of IvyCap Ventures find search funds appealing due to their low-risk, high-potential nature, as the businesses they target are already established with recurring revenue, strong customer loyalty, and minimal growth capital requirements.
- Entrepreneur Rehan Netarwala, founder of Okintek Capital, believes the search fund model is the ideal blend of investment and operation, as it allows for flexibility in fund commitment and provides a long-term, committed operator for family-owned SMEs navigating succession challenges.
- Opportunities in sectors like technology and fintech in the thriving Indian economy make the potential of search funds immense, as they offer a unique path to business leadership and growth for Indian professionals.
- In partnership with global investors like Will Thorndike, Tycen Bundgaard, and Pawan Danwar, Anurag Sinha, founder of Milestone Search Capital, is actively reviewing over 50 businesses under the search fund model, a fresh entrepreneurial venture gaining ground in India.
