Forget startups as MBAs snap up SMEs in Singapore

Goh Aik Chuan always dreamed of being his own boss, but in pragmatic Singapore, he dismissed it as a pipe dream. Through his twenties, he climbed the corporate ladder, first as an analyst at UBS Group then as an operations manager at Uber.

In 2019, while pursuing his MBA at Insead Singapore, Goh discovered the concept of a “search fund,” a vehicle where budding entrepreneurs raise capital to acquire and run an existing small business.

In April 2024, Goh launched Garlic Equity Capital – Singapore’s first traditional search fund – after securing S$500,000 (US$371,000) in search capital from 19 investors locally and overseas. His goal is to acquire an SME in Singapore or Malaysia, with an annual revenue between S$7 million (US$5.2 million) and S$30 million (US$22.3 million) by mid-2027.

Goh Aik Chuan, founder and managing partner of Garlic Equity Capital, aims to acquire an SME in Singapore or Malaysia by mid-2027. / Photo credit: The Business Times

At 36, Goh is part of a growing group of Singaporeans embracing entrepreneurship through acquisition (ETA), a strategy where individuals acquire established businesses instead of starting one from scratch.

The appeal was clear for Goh. “Rather than being disruptive, it’s like buying an old house and turning it into something more modern, more reliable. That excites me,” he says.

Growing momentum

Search funds, pioneered in 1984 at the Stanford Graduate School of Business (GSB), have become a favorite among MBA graduates aspiring to become CEOs. Under the traditional model, backers fund at least two years of search activities, covering the searcher’s salary and deal-related expenses. The full acquisition amount is raised once a suitable target is identified.

Historically, search funds were concentrated in North America – nearly 700 have launched in the US and Canada since 1984. But this model is gaining global traction. In 2023, 59 new search funds were launched outside of the US and Canada, according to a study by IESE Business School.

Asia is catching up, too. Malaysia and Taiwan saw their first traditional search funds in 2023.

See also: Search funds: the solution to Singapore’s succession woes

Inspired by search funds during his executive MBA at Insead Singapore, Kenneth Cheng left his corporate job last year to launch Mission Kay Capital. After raising over S$500,000 (US$371,000) from 14 investors, Cheng aims to acquire an SME in Singapore or Malaysia, with annual revenues of S$10 million (US$7.4 million) to S$30 million (US$22.3 million) by end-2026.

Search funds deliver promising returns. As of end-2023, they averaged a 4.5x return on investment and a 35.1% internal rate of return, according to the Stanford GSB 2024 Search Fund Study.

While traditional search funds are gaining ground, the self-funded model has been more common in Asia. Searchers in the region cover their operating expenses and seek investors only after identifying a target.

The search ecosystem in Asia was “basically non-existent” three years ago, notes Tycen Bundgaard, a Singapore-based search fund investor.

Asia’s maturing search ecosystem

Solving succession woes