.Roaring Mouse

Mike Speiser’s post on GigaOm is an interesting read. In it he talks about the opportunities that small businesses represent and why technology now allows entrepreneurs to target a relatively untapped market.

http://bit.ly/2cPcu3

At a recent technology/business event called Startup Weekend, I learned more about a concept called “co-working” (or coworking, to some). The basic premise is simple. Co-working allows solo entrepreneurs, remote workers and freelancers to work together in a common space and engage with others within a shared context. Co-working spaces are dedicated to co-working and are not merely shared office space. The physical amenities are identical between the two, but co-working spaces have deliberately been set up to foster interaction among co-workers.

There are several reasons to co-work instead of merely working at home by yourself. Alex Hillman, a co-founder of IndyHall, a co-working space in Philadelphia does an excellent job of listing and describing 6 reasons to co-work. I have listed them below in summary, but it’s instructive to read the detailed explanations from Alex. You can access his article here.

1.      Helps you avoid the feeling of loneliness from working by yourself

2.      Provides an external source of motivation

3.      Easy way to learn new things from other people

4.      Allows you to keep abreast of what’s going on in your community

5.      Keeps the separation between work and life distinct

6.      Resource-sharing helps you lower costs

Arguably, the most fundamental benefit of co-working is in the sense of community that it fosters. You can say “no (wo)man is an island” or insert a ton of other overused clichés about working solo here, but the fundamental truth is that people often work best when challenged and complemented by other people with different experiences, talents and resources. Brad Neuberg, one of the founders of the co-working space movement says his desire was to “create a means to an end; to be able to invent, within a community structure, without having to join a company”. Chris Messina, another of the early founders of co-working environments, describes the benefit of co-working spaces as “accelerating serendipity”. 

If you’re a solo-worker who believes that you can benefit from working together with a community of like-minded individuals, co-working might be for you. To learn more about co-working and where and how you can get involved in a co-working space, check out the links below.

http://blog.coworking.info/

http://groups.google.com/group/coworking

http://wiki.coworking.info

I recently had the good fortune to discover “Small Giants”, a book written by Bo Burlingham,  one-time executive editor at Inc. magazine. Rather than prescribe the latest “10 rules of this” or “9 effective methods of that”, Bo leads readers on an exploration of 14 different companies and how they’ve accomplished that which many corporate denizens are in constant search of – job-related success and happiness. The industries, methods and personalities that are highlighted in this book are disparate, but are all interesting, even if they don’t seem familiar. While two deli owners in Ann Arbor, MI, a tattooed punk-folk singer from Buffalo, NY and a hippie builder from California don’t appear to have anything in common on the surface, Bo Burlingham manages to weave a slender thread through every single personality and business highlighted in the book and cinches it to create a cohesive story that is entertaining, informational and inspirational.

“Small Giants” is a relatively simple read and serves as the perfect antidote for the somber mood that the business world is currently in. The book also offers hope for people who long to find ‘the perfect’ job and to those who believe they know how to do ‘it’ better than the way their companies currently do. You can read more reviews of the book at Amazon.com or visit the book’s site at Smallgiantsbook.com.

Over the weekend, I caught up with an old classmate of mine and during our conversation, he introduced me to the concept of “search funds”. A search fund is a pool of money that’s primarily used to finance the “search stage” of a business acquisition. This encompasses the following steps:

1. Identifying a business to acquire
2. Due diligence and evaluation of the target business
3. Negotiation of the deal

Search funds are structured organizationally in the same manner as a traditional investment vehicle, with one or more managing partners and several limited partners. The managing partners take the most active role in the search fund, and are responsible for all the steps described above. Limited partners are usually high net-worth individuals who provide the funding for the “search”. In a typical search fund, the limited partners are given the first right of refusal to invest in the target company once it has been identified and vetted. In practice, the majority of the invested capital is raised from the group of original limited partners.

Where search funds differ from private equity (PE) groups is in the focus of the investment. While PEs are generally viewed as “strip and flip” investors, whose goal is to maximize their investment within the shortest period of time, search funds take a longer term view of their investments. The managing partners of search funds become active managers of the acquired business and are focused on running the business much as if they started it themselves. The benefits to sellers of the business include:

1.      A possible answer to succession planning issues

2.      An exit strategy that allows them to liquidate while preserving the core tenets of the company

For the aspiring entrepreneur(s), a search funds provides the following advantages:

1.      Time to evaluate the right industry and company to match his/her/their skillsets and interests

2.      The ability to inherit a business that’s already operational and profitable instead of having to start from scratch

Currently, there are approximately 200 active search funds and most were started by business school and law school graduates. However, the concept should be intriguing for anyone who would like to own and operate their own business, but do not want to start from scratch. For more information on search funds, please check out the table and the links below:

Stanford Graduate School of Business search fund page

Interview with some search funders

I’d like to thank Andrew Matricaria at Lakeshore Capital Partners, LLC for his detailed and patient explanation of search funds.