Startup3.0: Supporting Entrepreneurs, Building Entrepreneurship through Acquisition & Search Fund

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By Divyang Arora
Entrepreneurship through Acquisition, also known colloquially as the Search Fund, is an emerging avenue through which aspiring entrepreneurs can quickly give shape to their entrepreneurial spirit leveraging their own managerial abilities.

What is it?

The Stanford Center for Entrepreneurial Studies defines search fund as “An investment vehicle through which investors financially support an entrepreneur’s efforts to locate, acquire, manage, and grow a privately held company. The model offers relatively inexperienced professionals with limited capital resources, a quick path to managing a company in which they have a meaningful ownership position.” Although many variations exist within search funds, the most common one is where the individual raises a fund from investors to “search” for a company and then buys the company with a mix of debt and equity capital. This process typically takes 18-24 months. The individual gets a meaningful equity stake in the company, operates it for 5-7 years typically, before exiting usually by selling it to a strategic acquirer or a lower middle market private equity firm.

Compared to the other two models of entrepreneur capacity building (Entrepreneur-in-Residence and Venture Studio) which help you launch a venture from the ground up, search funds would make you an entrepreneur through acquisition (EtA). Typically, the company for acquisition would be one with stable and recurring revenue, strong EBITDA margins, in a fragmented industry, with favourable industry trends, history of profitability and growth, low capex and multiple levers of adding value post acquisition. Generally, companies that first-time acquirers typically look for fall in the $1 – 3million EBITDA range.

While the concept of acquiring an existing business is as old as doing business itself, search funds as a separate asset class are relatively new and niche. According to the Search Fund 2020 study by Stanford, the number of new search funds stand at 51 in 2019. As an asset class, they generated 32.6 per cent IRR and RoI of 5.5 times. One of the most well-known examples of a successful search fund is Asurion, which was acquired for $6 million by two Stanford Business School graduates in 1995 and is now a multibillion (yes, billion!) technology insurance company used by approximately one in four people in the US.

Who should do it?
The common profile of a searcher is someone around 30, usually an MBA, with a few years of solid work experience under their belt though investors are becoming more comfortable backing non-MBA searchers especially if they have specific expertise (industry or functional).
Having seen many friends go down this route, there are some common personality traits I observed. The first was a desire to do something entrepreneurial and independent without necessarily being wedded to an idea or an industry. The idea of operating a company was appealing to them as opposed to preference for a sector or a need. Another is a penchant for being a generalist: enjoying finance, operations, strategy, people management and going into the weeds of running a business day to day as opposed to being biased towards a particular function. Lastly, there was a desire to own an already functioning business as opposed to going through the process of establishing one from scratch.

Pros and Cons
No other path allows for becoming a CEO of an established business at such an early age. The experience is hard to replicate and would be valued in the market very highly after exiting. Purely from a financial perspective, the median equity compensation for those who had exited the business was $3.25 million with a per-year value of $0.67 million for every year of operation and the median compensation was $253,500 (base salary plus bonus). Risk adjusted, these are better economics than most traditional jobs including investing roles and are only topped by outcomes for start-up founders with very successful exits which are outliers not the norm.
Search funds offer the same flexibility and independence as start-ups and arguably a better work-life balance and less uncertainty given the businesses are already functioning and steadier. Overall, the chance to go deep in an industry, understand how to grow a business and build a team are all invaluable skills and learning experiences.

On the flip side, the best search is one that is industry and geography agnostic. Many investors in search funds encourage the searcher to carry out a geography agnostic search in order to maximize the chances of finding the best business to buy. Simply put, you will have to move to whichever city the business is based in. While the move may be possible for the searcher, it could be the very difficult for their partner. Similarly, the industry the company operates in would usually be a traditional industry given the desire for stable and recurring nature of the cash flows. These would usually not be frontier/disruptive technology industries usually associated with start-ups (if at all that could be considered a con).

If you want to work in blockchain, machine learning or autonomous vehicles, want to only live in a large urban hub, want venture type growth and returns, this is probably not the ideal path for you. If you like operating and growing an existing business, if you are flexible putting down roots for a few years in a relatively smaller place and if you want a solid payout from a risk-return perspective, this is a great option.
Conclusion

Startup 1.0 was when investors felt comfortable backing entrepreneurs and ideas and then sitting back hoping to reap returns. There was minimal support and the entrepreneurs had to figure out solutions without any playbook. In Startup 2.0, there was more hands-on support in additional to the financial one as venture capital became more competitive and investors had to compete for the best deals. As the ecosystem becomes even more mature and competitive, there is the coming of Startup 3.0 which is biased in the favour of the entrepreneur. Investors are willing to go even earlier, put more resources than ever and back promising individuals without an idea or a team. If you’ve ever wanted to pursue entrepreneurship, now is the time to do it!

(The author an alumnus of Harvard Business School, is an advisor and operator in startups and technology. The views expressed are personal)

Source: IANS

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Meet Gurmeet singh Shunty A New Superhero With Turban

Meet Gurmeet singh Shunty A New Superhero With Turban

In the last year, the whole world was struck by a large pandemic. The year 2020 came with a pandemic called coronavirus which affected the whole world badly. Coronavirus in India resulted in great downfalls in health, economy, unemployment, and so on. Lakhs of People Lost their lives, jobs, and their loved ones. The whole year was very disturbing for each section of society. Coronavirus in India resulted in great downfalls of health, economy, unemployment, and so on. The whole year passed with a large Tension and fear for all the peoples. In the hard times of coronavirus spread, a lot of peoples came out and helped the person in need and It is one of the very few positive effects of Covid-19.

During the blast of the Covid-19 pandemic in the world our volunteers have demonstrated an exceptional display of solidarity across the world and our society. However, this is also the year which witnessed the world coming together to fight coronavirus. The year with its share of trials and tribulations threw up some exemplary work being done by organisations and individuals in this difficult time as the pandemic spread, a new breed of warriors with an indomitable spirit stood up bravely against it to take on the challenge head on.

In the hard times of lockdown, a lot of peoples came out and helped the person in need and It helped the society to live again with a hope of being helped in bad time. During the Large spread of the Covid-19 pandemic in the world our leaders of the society have demonstrated an exceptional display of solidarity across the world and in our society too. They did a Great work in every aspect needed at that time, from Responding to calls for help from their local communities to help them by going on roads, they are everyday heroes who came as a preserver for them.

They do wear masks and face shields to protect themselves and spread awareness in the society to follow each rule and regulation. We can say that there are many things which has spread faster than the coronavirus during the pandemic, it has been the noble works, fearless steps, selfless service and recognition of Gurmeet Ji and his supporters who continued to work day and night to save other’s lives. He also set up camps and volunteer help alongside highways and by roadsides, just to provide relief and support the migrant workers going back to their places all over India.

Among the Great hidden heroes who worked day and night to fight during lockdown, one such person is Gurmeet Singh shunty ji, who is the ex general secretary of delhi sikh gurudwara committee.Being at such great post he always learned to do sewa and that teaching has been always with him which dedicated him towards the society to work for the people of his own nation and humanity. Gurmeet Ji worked 24×7 , without caring of himself. He is the person who have been stepping in to help during the pandemic and they all have been a portrait of selflessness and optimism to this society.

Gurmeet Ji believe that our selfless acts or Sewa in any form must be done to save humanity, Sewa require a true heart and helping nature which will bring both helper and victim happy. During the tough times of coronavirus, Gurmeet Ji and his volunteers came out of their comfort zones to help lakhs of migrants workers who wanted to go back to their hometown during the COVID-19 lockdown. So in that  time  when the world undergoes such vast pandemics which affects all the person Whether it’s a small or large donation of money, resource or humanity, each things matter.

During the tough times of coronavirus, when everyone was thinking of themselves First, Gurmeet Ji and his volunteers came out of their comfort zones to help lakhs of migrants workers who wanted to go back to their hometown during the COVID-19 lockdown.Despite of being older in age,He did not let himself to be inside house and watch news of the suffering surroundings but he helped as many people as he could during the crisis by arranging food, buses, trains and most importantly by giving a warmth of love and care.He created a large team just to help the peoples in problem and inspired many others to do so. We can say that there are many things which has spread faster than the coronavirus during the pandemic, it has been the noble works, fearless steps, selfless service and recognition of Gurmeet Ji and his supporters who continued to work day and night to save other’s lives by risking his own and his family’s health. They didn’t even meet their family members and specially children for months,for their Safety and some even spend nights in their vehicles and outside home to assure that the virus doesn’t spread further to their loved ones and family members. Government took various steps to save our nation from the bad impacts of corona spread and one of them was lockdown. Lockdown was done to stop the spread the corona in nation but it resulted in great losses.when lots of People were on Roads, lots have nothing to eat and some were not having anyone for their care, without any money and food thousands of People covered thousands of kms on their feets, with their families and whatever they had earned in their lifetime, there comes some unknown super heroes of our society who helped them selflessly.

Their faces get rashed by the mask marks, they continuously took medicines to save themselves and others too. They maintain distance from their own members in order to help other persons to reach their destinations. In the bad times we get to know about many such People and These are the people who are helping in restoring humanity’s faith by coming up with novel ideas and their great works which inspires whole society to come ahead. That was the time when a number of labourers, their children and other family members were forced to return back to their places but Gurmeet Ji risked his life to save theirs.He started his service with providing cooked food as langar sewa and later switched to dry rations too, with the objective that people in need should not go to sleep on an empty stomach and they must not loose their hearts and continue their journey with less problems. It’s very hard to find such person in this crucial time when everyone put themselves first but Gurmeet Ji believe in his teachings and said “our panth has taught us the lesson of jan sewa, and we will continue this legacy till our last breathe.”

All the people who helped any of the person in need will be in their memory for forever as they made them believe on brotherhood and humanity in such a Crisis. It is beleived that in when some person get trapped in trouble even your shadow leave your side but the persons like Gurmeet Ji taught each and every person of society that we Must help each other to maintain love and care in society which will make then believe in the existence of god. If God has given you the power and resources to help others you must move forward as your one step can change anybody’s life.Gurmeet ji said that “our great sangat give us the teachings of sharing whatever less or more you have and These teachings which I started learning since my childhood inspired me to help my brothers and sisters of this society. ” He further added that he feel so happy and blessed that he could be the reason of anyone’s little smile. He requested everyone that even Your small step can save someone’s life and make them beleive into humanity and brotherhood.He started his service with providing cooked food as langar sewa and later

 

switched to dry rations too, with the objective that people in need should not go to sleep on an empty stomach and they must not loose their hearts and continue their journey with less problems.

He also set up camps and volunteer help alongside highways and by roadsides, just to provide relief and support the migrant workers going back to their places in UP, Bihar and even farther. It was clearly seen during the pandemic when thousands of people were going towards their villages with their small children and had nothing to feed them, at that time Gurmeet Ji provided them food ,water and other necessary items which brought  beautiful smiles and tears of happiness in their eyes as they never expected that in this crucial time there could be someone who will act as a survival medium for them.

At that time many warriors came in the front line to help the society. Despite being senior in age Gurmeet singh Shunty ji, was the Person who came out of the house when everyone was locked. He was standing in the crowd to help them reach their houses and made  very hard decisions at the right time.

We need to Recognise these Heroes so that they could work more and more for the welfare of this society. We need to Recognise these unsung Heroes so that they could work more and more for this society as “this society is all about give and take.”  They have given millions of smiles and its our time.They must be appreciated for their noble works to boost such works of brotherhood. They have given millions of smiles and its our time to pay them back.

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