Search Fund 101

"A search fund is an investment vehicle in which investors cover the operating expenses of an entrepreneur’s efforts to locate and acquire a privately held company....The search entrepreneur writes an offering memo emphasizes the planned search process and acquisition criteria. The search funder circulates the memo to individuals who typically invest $20–25k each. A ces study found that the median first-time search funder raises $290,000 from 12 investors.

In return, the search fund investors receive both a carried interest in the eventually acquired company, as well as a pro-rata right of first refusal on subsequent acquisitions"

Read more in this article from Stanford CES