Search funds are a 40-year-old model from MBA programs increasingly applied to small businesses including route services. Worth understanding even if you don't run one.
The structure. A "searcher" raises a small pool of capital (usually $300k–$500k) from investors specifically to *find* an acquisition over 12–24 months. Once a target is identified, the same investors (and often new ones) fund the actual purchase. The searcher becomes CEO, with significant equity earned over time.
Why it works for buyers.
- Salary while searching (no need to be independently wealthy)
- Investor capital for the acquisition itself
- Mentorship from experienced investors
- Built-in board of directors
Why it works for investors.
- Returns on small-business acquisitions can be excellent (15–30% IRR is realistic on a well-run route business)
- Diversification across many small searchers
- Lower competition than later-stage PE
Adapted for pool routes. Most search funds traditionally targeted $1M–$5M EBITDA businesses. A growing number of "self-funded" searchers and route operators are running mini-versions: $50k–$150k from friends-and-family for search expenses, plus SBA + seller financing for the deal itself, with investors getting 10–25% equity in the operating business.
When this is a fit. You're full-time on this. You have credibility (operating experience, MBA, or strong network) to raise capital. You're targeting a deal larger than you can self-fund. You're comfortable reporting to a board.
When it's NOT a fit. Buying a small first route. You want full ownership. You can't tolerate sharing decisions. You don't have the network to raise capital efficiently.