A New Wave Podcast

Glen Silvestri: Investing in the Future With Search Funds and Entrepreneurship Through Acquisition

portrait of Glen Silvestri
Glen Silvestri is the Managing Partner of Sage Capital and in this episode we explore the nuanced world of search funds and entrepreneurship through acquisition (ETA) in Canada. Glen shares his journey from the early days at Ontario Teachers to becoming a pivotal figure in the Canadian search fund landscape, highlighting the growth and opportunities within this unique investment space. Listeners will gain a deep understanding of what search funds are, the typical profiles of searchers, and the strategic thinking involved in investing in and growing small businesses through this model. Glen discusses the challenges of balancing investor expectations with entrepreneurial visions and how Sage Capital supports its portfolio companies from acquisition to successful exit strategies. This episode is a must-listen for anyone curious about alternative paths to entrepreneurship and investment, offering a blend of practical advice, industry insights, and personal anecdotes that illuminate the path to successful investments in the search fund ecosystem.

Season 9 — April 24, 2024

5 Search Fund Facts:

  1. Diverse Entrant Profiles: Glen sheds light on the evolving backgrounds of search fund entrepreneurs, moving beyond the traditional Master of Business Administration (MBA) graduate profile to include varied professional experiences and educational pathways.
  2. Evolution of Search Funds: Initially developed in the US, search funds have evolved significantly. Search funds in Canada have grown from 15% of capital coming from Canada to now 25-40%.
  3. Sage Capital’s Role: As a managing partner at Sage Capital, Glen supports search fund operators from acquisition through to successful exit, emphasizing strategic growth and investor alignment.
  4. Nontraditional Path to Entrepreneurship: Although it’s not new, acquiring a business through a search fund with the support of a consortium of investors is a lesser known path to entrepreneurship.
  5. Investment Strategy: Sage Capital focuses on a wide range of industries, favouring companies with potential for long-term growth and strong operational frameworks.

Show Notes

[0:00:52] What is a Search Fund?: Glen explains the basic concept of a search fund and the typical profile of someone who would start one.

[0:02:31] Glen discusses the origin of search funds in the US and their evolution over the years.

[0:04:24]  Financial Returns: Discussion on the financial returns of search funds, using data from the Stanford Search Funds Study.

[0:08:36] Glen elaborates on the diverse backgrounds of search fund entrepreneurs beyond the traditional MBA pathways.

[0:12:50] Glen shares his professional journey into the search fund space and the founding of Sage Capital.

[0:17:30]  Specific strategies and criteria that Glen and Sage Capital use when selecting search funds to invest in.

[0:22:01] Glen discusses various types of nontraditional search funds and different investment opportunities in the lower middle market.

[0:26:09] Exploring the concept and appeal of self-funded search initiatives.

[0:37:43] Exit Strategies: The typical buyers of search fund-operated companies and the exit strategies employed.

[0:41:52] Long-Term Holding vs. Early Selling: Glen addresses theories and practices regarding the optimal time to hold or sell a search fund-operated company.

[0:48:53] Glen offers advice to his younger self based on his years of experience in search funds and ETA.

Resources & Further Reading
Sage Capital Partners is an institutional fund established in 2019, dedicated to bolstering the Search Fund landscape in Canada. As the first of its kind, Sage Capital specializes in supporting both traditional and non-traditional searchers and entrepreneurs. They help to facilitate the acquisition and growth of companies within the lower mid-market sector. Stanford Business Search Fund Study This study provides a comprehensive analysis of 526 search funds established in the U.S. and Canada since 1984, detailing their financial returns, acquisition activities, and key operational characteristics up until December 31, 2021. It offers new insights into seller relationships, acquisition multiples, and searcher ethnicity, complemented by detailed data on the search process, and acquisition specifics. Complete Canadian Small Business Guide 4/E by Douglas Gray and Diana Gray is the quintessential resource for Canadian entrepreneurs looking to start, manage, and grow their small businesses effectively. This fully updated guide covers a wide array of essential topics, from whether you should buy a business and where to get financing to how to market your business properly.
Highlights
"A search fund is a vehicle that allows an individual to run a company and basically buy it from the current owners and that owner is usually an entrepreneur or a family that is retiring or wants to step away from the day-to-day of the business." [00:00:52]
“I think you have to have the right personality but it's no longer really stuck to just you know people who went to Stanford Harvard it's kind of evolved over time and certainly Canada I think has been leading the charge on that.” [00:10:25]
"My first reaction was: That sounds absolutely crazy and I'll never invest in it. So basically you're telling me I got to invest in kids that have no experience to run companies and I put my own money in and they have very little oversight and he's like yes. And it does really well." [00:12:50]
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