What to Look for in a Search Fund Operator: An LP's Evaluation Guide

By Nick Bryant

TL;DR: In search fund investing, the operator is the investment. Evaluate five dimensions: professional background (M&A, operations, or industry experience), skin in the game (10-25% of net worth), the quality of their advisory team, the specificity of their 100-day plan, and soft skills like communication, coachability, and resilience. A strong operator with a mediocre business will outperform a weak operator with a great one.

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The Operator Is the Investment

In public markets, you're buying a business. In venture capital, you're buying a market opportunity. In search fund investing, you're buying an operator. With the silver tsunami creating record deal flow, the pool of operators seeking capital is growing — making rigorous evaluation more important than ever.

This isn't an exaggeration. The search fund model puts a single individual — often a first-time CEO — in charge of finding, acquiring, and operating a small business. The quality of that individual determines everything: deal selection, purchase price discipline, post-acquisition execution, team management, and ultimately, your returns.

Here's how to evaluate them.

Professional Background

Not all backgrounds are created equal. The most successful search fund operators tend to come from roles that build complementary skill sets:

High-correlation backgrounds:

• Management consulting (McKinsey, Bain, BCG) — analytical rigor, structured problem-solving, comfort with ambiguity
• M&A advisory or investment banking — deal evaluation, financial modeling, negotiation experience
• Operations roles — P&L management, team leadership, process improvement
• Industry-specific experience — deep knowledge of the target sector's dynamics, customers, and competitive landscape

What to watch for:

• Pure finance backgrounds without operational experience. These operators can model a deal beautifully but may struggle with the day-to-day reality of running a $5M revenue business with 30 employees.
• Career-long corporate experience without entrepreneurial exposure. The transition from a large organization to a small business is culturally jarring. Operators who've only worked in structured environments may struggle with the ambiguity.

First-time operators aren't disqualifying — most search fund operators are first-time CEOs. But first-timers need stronger support systems around them.

Skin in the Game

Capital at risk creates alignment. It also reveals conviction. An operator who invests meaningfully in their own deal is telling you they believe in the opportunity with their wallet, not just their words.

Benchmarks:

• Self-funded search: The operator should have 10-25% of their personal net worth invested in the deal. (For a full comparison of how self-funded search differs from traditional PE structures, see search funds vs. traditional PE.) They've also foregone salary during the 12-24 month search — that's additional skin in the game that doesn't show up on the cap table.
• Traditional search: The searcher may not invest at acquisition (the step-up compensates for search-phase risk), but the best ones do. Even a modest personal investment signals alignment.

Red flags:

• Operators who want maximum equity step-up with minimal personal investment
• Reluctance to discuss personal financial commitment
• Structuring that allows the operator to extract management fees or salary that effectively returns their invested capital early

The Advisory Team

No first-time operator should go it alone. The quality of the team around them is a strong signal of the quality of the outcome.

Key advisors to evaluate:

• Quality of Earnings provider. Who is performing the QoE? A reputable, experienced firm catches issues that less rigorous providers miss. This is not a place to cut costs.
• Transaction attorney. SMB deal structuring is specialized. The attorney should have experience with SBA loans, seller notes, earnouts, and the specific legal structures common in search fund acquisitions.
• Industry advisors. Does the operator have relationships with people who know the target industry deeply? Board members, informal advisors, or operating partners who can provide pattern recognition.
• Investor network. Who else is investing? Experienced search fund investors bring more than capital — they bring deal flow, operational advice, and connections. A strong co-investor syndicate is a positive signal.

The 100-Day Plan

Every serious operator should have a detailed plan for the first 100 days post-acquisition. This document reveals how they think about value creation, prioritization, and execution.

What a strong 100-day plan includes:

• Specific operational initiatives with timelines and expected impact
• Team assessment and organizational changes (if needed)
• Customer and vendor relationship management strategy
• Quick wins vs. longer-term strategic projects
• Key metrics they'll track and report to investors
• Contingency plans for common post-acquisition challenges

Red flags:

• No written plan at all (they're "figuring it out")
• Vague generalities ("improve operations," "grow revenue") without specific actions
• Plans that focus exclusively on cost-cutting without any growth strategy
• Overly aggressive financial projections without clear operational drivers

The 100-day plan doesn't need to be a 50-page document. But it should demonstrate that the operator has thought seriously about what happens after the deal closes — because that's when the real work begins.

Soft Skills That Matter

Technical competence gets you to the table. Soft skills determine whether you succeed.

Communication. Does the operator communicate clearly, proactively, and honestly? In practice, this means: do they share bad news quickly? Do they provide context, not just data? Do they respond to investor inquiries promptly? Communication quality during diligence predicts communication quality during the hold period.

Coachability. The best operators actively seek feedback and adjust. They have strong opinions, loosely held. They build advisory boards and actually use them. Operators who can't take feedback — especially from experienced investors — tend to make avoidable mistakes.

Resilience. SMB acquisitions don't go smoothly. Revenue dips post-close. Key employees leave. Customers churn. The operator's ability to navigate adversity without panicking or making rash decisions is critical. Ask about past failures and what they learned.

Cultural sensitivity. When a new owner takes over a small business, the existing team is watching closely. Operators who come in with a "I know better" attitude alienate the people they need most. The best operators earn trust before making changes.

Applying This Framework

Operator evaluation is ultimately a judgment call informed by pattern recognition. The more search fund investments you evaluate, the better your instincts become. But even experienced investors benefit from a structured approach.

For the seven essential questions to ask any search fund operator, see 7 questions to ask before investing in a search fund. For the complete 20-question diligence framework, read the LP Due Diligence Guide.

Download the LP Due Diligence Template to build operator evaluation into your standard process.