Wednesday, May 22, 2024
Wednesday, May 22, 2024

8 questions aspiring entrepreneurs should consider before launching a SF & 10 reasons to not pursue ETA

2 Yale Cases. By: Narbe Alexandrian / Matt Littell / A. J. Wasserstein.
We are thrilled by the increasing popularity of ETA on MBA campuses. This model...

2 Yale Cases. By: Narbe Alexandrian / Matt Littell / A. J. Wasserstein

We are thrilled by the increasing popularity of ETA on MBA campuses. This model, we believe, offers a unique pathway for young, inexperienced entrepreneurs to step into a CEO role immediately after completing their MBA.

However, with the surge in entrepreneurs entering the search fund landscape, we express concerns about some individuals entering prematurely without careful consideration. Pursuing an ETA project is a significant commitment that impacts career, family dynamics, financial opportunities, and geography for an extended period.

The 2022 Stanford Graduate School of Business Search Fund study reveals that 35% of searchers fail to close an acquisition, and 27% of those who close a deal fail to create positive economic value. The demanding nature of ETA makes it unsuitable for the timid, and despite its challenges, we remain unwavering proponents if the potential searcher has thoroughly evaluated their fit for the program.

To assist potential searchers in assessing their suitability for ETA, we have formulated a series of 8 questions. While not exhaustive, these questions are designed to guide aspiring entrepreneurs in meaningful introspection. These queries cover personal characteristics and skill-based aspects, acknowledging that skills can be learned, but personal characteristics might be less malleable:

  1. Am I considering ETA because I cannot imagine doing anything else?
  2. Am I okay with being different and taking the road less traveled?
  3. Do I have the skills to lead and grow a company?
  4. Am I gritty enough for this project?
  5. Can I tolerate all of the ambiguity and risk in ETA?
  6. Am I comfortable selling all the time?
  7. Do I have the appropriate support networks for an ETA career?
  8. Do I have reasonable financial expectations for an ETA pathway?

We emphasize the importance of deep reflection and research before embarking on an ETA journey. While we acknowledge the challenges and uncertainties, we firmly believe in the potential of ETA for those who have carefully considered its demands. Our intention is not to provide definitive answers to the questions posed but to encourage individuals to thoughtfully evaluate their own readiness and qualifications for the ETA model.

Read the full case in: https://yale.app.box.com/s/42as8qvbllod37h4mcp4gnk2exxqwt9i

And for those who have passed the test and are determined to launch a Search Fund, we invite them to read the 10 reasons to absolutely not pursue ETA:

  1. Failure lurks at every juncture
  2. Searching for and operating a small business can be excruciatingly difficult
  3. Investors might not provide the support and mentorship expected
  4. Regardless of the outcome, the ETA path can test a marriage & family dynamics
  5. The geographical challenges and constraints can have large implications
  6. If someone really wants to be an investor, they should just be an investor
  7. This is a very lonely and isolating path, even with a partner
  8. Once a company is acquired, the CEO might be stuck
  9. The financial opportunity is not that convincing
  10. The financial opportunity cost is high

As a conclusion, the authors specify that it is not their intention to dissuade prospective entrepreneurs from pursuing an ETA journey. If you comprehend the 10 encumbrances they outline in this note and believe you can overcome the adverse odds and each hurdle, ETA might be for you. Best of luck to all the brave.

Read the full case in: https://yale.app.box.com/s/pxao2wy88lrbf462jx4mg1ex2jh9eack

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