A growing number of young U.S. business school graduates are choosing to buy established companies rather than build startups or climb the corporate ladder. The model, known as entrepreneurship through acquisition or search-fund investing, allows aspiring operators to raise money from investors, acquire a small business, and take over as chief executive.
The approach has become more common in recent years. According to Yale School of Management research, 94 traditional search funds were launched in the U.S. in 2023, while $682 million in investor equity went into search funds and acquired companies across 2022 and 2023.
Search Funds Give Young Entrepreneurs a Faster Route to Ownership
A traditional search fund usually starts with investors backing an entrepreneur to look for a suitable company. If a deal is found, those investors can provide additional capital for the acquisition, after which the entrepreneur typically becomes CEO or president of the business.
Ania Aliev followed that route after graduating from Dartmouth College’s Tuck School of Business. At 27, and only three months after giving birth, she became owner and CEO of Massachusetts medical equipment company Life Support Systems.
Aliev said she initially focused on observing the company rather than immediately changing how employees worked. More than two years later, she has acquired a competitor and says the transaction doubled the size of the business.
Specialist firms including Search Fund Partners now invest specifically in entrepreneurs pursuing acquisitions and provide both capital and operating guidance. Search Fund Partners describes the model as backing entrepreneurs to find, acquire, and manage profitable small companies.
Returns Can Be Strong, but Failures Can Be Severe
The model attracts investors partly because historical returns have been high. Yale noted that aggregate search-fund internal rates of return have remained in the mid-30% range since 2011, although returns fall into the low-20% to low-30% range when the strongest performers are excluded.
Those figures do not mean every acquisition succeeds. Scott Duncan, a Harvard Business School graduate, bought Massachusetts manufacturer F&M Tool and Die in 2018 but struggled with employee departures, new competition, the pandemic, and other operational problems.
He eventually closed the company in 2025 and filed for personal bankruptcy. Duncan now advises aspiring buyers to be realistic about how difficult operating an established business can be, even when an acquisition initially appears attractive.
Leadership specialists say age itself is not necessarily the main challenge when a younger executive takes over an older business. The larger issue can be uncertainty over how much the new owner will change established working practices.
Search funds continue to attract graduates because they offer a direct route to ownership of an existing company with customers, revenue, and employees already in place. The same structure, however, also means inexperienced operators can quickly inherit the financial and managerial risks that come with running an established business.
Featured image credits: Wikimedia Commons
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