“Search Funds” a Sign of a Broader Trend?
Today’s edition of the Wall Street Journal has a fascinating article on the front page of the Money and Investing section. (link here). It’s titled “Risky ‘Search’ Funds Draw Entrepreneurs.
The article describes a kind of micro private equity firm that’s been a category now for about 15 years . They basically find a company, invest some bridge money ($150k – $750k) and take an active management roll. The goal is to position the company for a significant investment later on, say $5MM.
Sounds like a westcoast development, I could not find evidence of this specific category in Texas, however, I did find California search funds seeking activity in Texas. Here in Texas we probably call it something else. Anyway, this is all good.
I have been hearing lately about the huge amounts of “money on the sidelines.” A suggested explanation is that investment capital that would normally flow into commercial real estate development is actually on hold, hoping for the day to arrive when properties are finally marked down to true market value. But that does not seem to be happening.
Here is an interesting notion: perhaps an entire layer of capital investing will have to re-evaluate risk, since this economy and this financial system is so poised for change. Perhaps equity investing from $1MM to $50MM will have to focus less on fixed assets and more on human resources – like entrepreneurism, and the business opportunity inherent in capable, competent and committed people, who leverage teamwork and good ideas to create real value for society.
This may be a trend. The Technology Incubator West Houston is set up to help in this overall process. Where there are people that want to grow a business, we are focusing resources to help. Give us a call (281 396 2200) or email our development manager, Frank Lombard at firstname.lastname@example.org