Product Leader turned Search Fund Entrepreneur with Chris Tyler

Full Video Podcast on YouTube here https://youtu.be/h-Sye7kRzHQ

How might you introduce yourself to those unfamiliar with the field you're involved in?

Absolutely! So I started a new job and a new career about seven months ago, and I'm searching for a business to buy. The way it works is I'm doing something called a search fund and I have raised money for two years of me searching. That covers two things broadly. One is, salary for me, and the other is all of the other overhead and expenses associated with searching: software subscriptions, travel to meet sellers, things like that.

I’m kind of into this new journey, and it's a two-step process: First, you're an investor, looking for a business to buy and trying to find a great business. Then, after that, you're an operator, running the business as the CEO and expected to stay with the business in the long term. So, but before that, I was in product for 14 years.

Additionally, I went to business school before working in Product, and then I raised a Search Fund. When I started working in product in 2009, there were not a lot of MBAs, and it was actually a bit difficult to explain to people. But by the time I left six months ago, I think it’s more common, and people view it as more of a nice thing to have.?

What’s your origin story of being a full-time search fund partner??

Yeah, part of it does tie back to business school. The search fund that I'm doing is a typical post-MBA thing to do. Today, I think you're seeing more people without MBAs doing it, but it's probably 10% of searchers. Most of them are right out of business school. So it was on my radar because of that, although search has grown a lot in popularity. When I graduated in 2009, I think there were three people out of my class of 900 who did a search fund.?

I heard that the graduating class last year had 40 or 50 people doing search funds. So there's definitely a lot more interest in the space, a lot more money flowing in, and therefore more people searching. But the reason that I'm searching is because of a classmate and section mate of mine, Katie Laidlaw, who purchased a company through a search fund in November 2022.

And when I read about the acquisition, I didn't really understand how it had come together. So I pinged her and she said, Oh, you know, I bought it through a search fund. She told me about the process and the company she bought is pretty big and it's a tech company or an online company. So that really changed my idea of what was possible with search. Back in 2009, people were buying companies that were much smaller and there was no, usually minimal degree of technology in the businesses. Now a lot of people are trying to buy software businesses and people are buying bigger companies. So I talked to Katie and that was the first thread that I pulled on. And then after that, it was probably seven or eight months later that I had quit my job and left to search full-time.

How did this decision come about? What influenced your decision to jump into this space?

I think it was really like running to something v.s. running out of tech because other than this, I had no other plans to leave tech. If not for this, I'd probably still be a product manager, I'd probably still be at Meta and I was generally very happy there. So, I think it was more that this other thing came on my radar and the things that drew me to it were the chance for more autonomy and more responsibility.

I think in tech companies, PMs do have a lot of responsibility and a lot of ability to set the direction because in a tech company, the product strategy is very aligned with the company strategy. But it was an opportunity to get to oversee everything and be a CEO. And I just realized that that was more exciting than I had given it credit for. I realized it was an experience that I wanted to have. It just all happened very fast and met great investors, met a lot of people who were doing it and it just felt right. So, I started a new chapter and so far I've been really happy with it.

I have always felt a draw towards entrepreneurship and I've never had something that I was passionate about enough to start a company and try something from scratch. And I am getting a lot of ups and downs in the search process. It is very much a roller coaster, and it's been really hard. But I'm generally like happy with what I'm doing and glad that I took the lead.

What are some skills you had to learn versus unlearn coming from big tech?

I think that as a product leader, I was just really obsessed with the product, whereas looking for a business to buy, I have to be obsessed with the business. I remember when I started searching, I would often get really pulled into research topics like, what does this company do, how it functions, and all of that. Now I just go straight to financials first and kind of understand how it makes money. So I think there's a much stronger, financial perspective than I'm used to and that's been something like a muscle that I’m building.?

But other than that, I would say a lot of the skills from product have been really transferable. I'm so happy with all the time that I spent in product. I think it's made me a better searcher. It will help me be a better CEO. In terms of big tech skills, I think that one of the biggest things that I got from working in a really big company was the ability to communicate well, especially through writing. And I think that's helped me a lot with fundraising and talking to owners. So a lot of it has been transferable. I think it's mostly been about building new skills that I didn't have before and thinking like an investor rather than forgetting or unlearning other things.

I think that it's a nice recap of things. It highlights how there are a lot of similarities. I used to tell PMs who worked with me that a big part of the job is sales because you're spending the company's most important resource, which is engineering time. It's more valuable than money. A lot of times, the companies I worked in were not dollar-constrained, but they were more engineering-constrained. And that’s when you have a vision and you want to do something, sales is a big part of that.

Clearly communicating the why and the metrics to show progress. The process of buying a business is really similar. You're looking to paint a vision of what the business could be, but then you need to bring people along and help convince them and take feedback. Similar to product management, sometimes you'll get feedback or hear things from investors that you might choose to say: “Okay, I hear you, but I disagree, and here's why”.

Sometimes, you want to roll it in, and you can't take everyone's opinion and mash it together into a Frankenstein. You need to be opinionated and know when to say yes and no to the input you're getting. But it's a very, very similar system in some ways. The difference is that you're deploying dollars instead of engineering time.

What does a typical day look like for you as a Search Fund Entrepreneur?

Similar to product management, it's kind of haphazard. Days are not very predictable, but if you zoom out, there are three broad things that I'm doing. The first is generating ideas about industries that I want to reach out to. A big part of what you're trying to do with a search fund is buying a company in a really great industry.

And meaning that the industry itself is going to grow a lot over the next few years. And that just by virtue of being in that space, the company is probably going to do pretty well. If you were to compare it to buying a house, I would think of it like buying a house in a good neighborhood, where the neighborhood is kind of up-and-coming. And you need to thread the needle because you also can't buy something in an industry that's super hot and is therefore too expensive. So you're trying to find these industries when they're really poised for growth in the next five years, but also not super mature. Also, as industries are more mature, they get more consolidated. So you're looking for industries where there are smaller players, things are still more fragmented, but there's a lot of growth ahead. So that's kind of the first activity or thing I do, which is more kind of academic or strategic. And it's often built around identifying big trends and then figuring out the businesses that will feed off those trends in the coming years.?

For example, one trend that I'm doing a lot of research around right now is data center build-out. It was just up and to the right to begin with, and then all the LLM and AI stuff made it that much bigger. There are many services around the data center world that help them get built, maintained, and upgraded. So that's the first bucket of activities like thinking about trends and finding industries that are impacted by those trends.?

The second step is the actual operationalization of outreach to these industries. That's a combination of email, phone, and handwritten letters, just different ways to reach business owners and try to get them on the phone. It's basically sales, cold, outbound sales. So I've learned a lot about the sales process. I've learned how a lot of sales is actually like lead generation, having a healthy top-of-funnel. So, that's the second activity that takes up a lot of time. That's probably like the bulk of it is just talking with owners and seeing if there's a fit on both sides.

Then the third activity is company evaluation. So this comes after you have information about a company. That could be financials, owner conversation, things like that. That's the process of saying “Am I interested in going deeper in the funnel with this particular company?” That's where I've learned a lot in the last seven months and have much more intuition. I think intuition is super important in product management. I think that people who have been in product for a while, you can kind of just feel into things and obviously it's supported by data and all of that and the rest of the team, but I think intuition is super important. And I think the same is true in investing. Because, again, they're both kinds of investment decision jobs. So I'm building that intuition and can do the company analysis a lot faster now and say yes or no a lot faster than I used to. Everything was so slow for me in the beginning. I was new and not very good at the practice. So I'm getting faster and better there. But, I'd probably say it's 20% industry ideas, 60% owner conversations and outreach, and 20% company evaluation.

How did your investment intuition evolve during the past eight months of your exploration?

I've been really fortunate to be doing a funded search where I'm working with investors. The short answer is I've learned a ton from my investors. All of them have been in this for a really long time and have really good muscle memory and intuition. It's just been a process of taking things to them and learning why they're interested or not interested. So, again, it's similar to product management there are a lot of different opinions and it's about taking kind of the collective and choosing what I choose to pull from that. Because, similar to product, you can't just say, okay, yes to what every cross-functional partner says. You do need to have your own conviction and decision at the end of the day. So I've been very, very fortunate to have a great investor group and I've just been soaking it up and learning a ton from them.

With all of this happening right now, what else are you allocating your time to?

Family. I have a 12-year-old daughter and a 6-year-old son. I spend a lot of time with my wife. Honestly, that's been it. It's been work and family, and that's been all I've had time for. Social stuff, the other stuff have really suffered. I've been working a lot lately. But the money I raised, it's only for two years. It's for a discrete period of time. So, I've never had a job with an expiration date on it before, but it's making me work extra hard. If I don't acquire something, I could be at peace with that, but only if I felt like I didn't have anything left in the tank at the end of it. I could really, really give it my best. So I'm just trying to put in that level of effort every day.

As I get my feet on the ground more, I'm a little more comfortable taking some time for myself. However, generally, I've just been in fear and excitement mode, working a lot but also making time to be with my kids and my wife.

What are your goals within the next three to five years in your search fund??

I hope to acquire something this year, ideally in the 2024 calendar year. And then in terms of operating the company, I don't know how long I would want to stay, but the goal is to find something that I could see myself being at for decades, where I like the business and the space that much. But I also realized that the job you take is never the same as the job you leave and things change over time. But, generally, I'm trying to find something where I can stay in it for the long term.

The other factor that matters a lot, at least for me, is that I would have a really significant ownership stake in the company. And that would keep me feeling, oh, I want to stay here in the long term and keep doing this. Whereas in other tech jobs, my ownership percentage has always been so minuscule that it's a different motivation, I think, when you own.

Do you have any tips for those who might want to consider a similar path to yours or those who want to collaborate with you? What is the best way to reach out to you?

I do hire interns, but in terms of directly working together, I'm not hiring right now. I'm still trying to figure out the intern model. It's been tricky. I have never managed people who did not rely on the job as a full-time source of income, so that's been interesting to figure out. It's a different dynamic and trying to find ways to keep it interesting for people and get a predictable amount of work back in exchange.?

But I would say subscribe to my newsletter “ETA 101”. I'm going to be writing again soon, probably next week, and then just reply to that and I check that. If you're interested in entrepreneurship through acquisition, I will do another go at the Maven course. The purpose of the course was to figure out, if I were to do this, what would I be doing? How much money could I make? What are the activities involved?

It's kind of assessing the two major flavors of doing this. One is doing a search fund, which is what I did. The other is doing a self-funded search where you don't work with an investor group and you use a form of debt that's government-backed called an SBA loan. So they're more similar than different, but there are pretty big differences between them as well. So, I think subscribing to the newsletter, that's probably the best way.