Coursework for aspiring searchers
Looking to build a more robust skill set to support your journey as an entrepreneur? David shares courses that he highly recommends MBAs to take who are considering ETA.
To be honest, I got pretty lucky stumbling into the ETA path while studying at Chicago Booth. I entered the program planning to build my curriculum primarily around entrepreneurship and finance. After one quarter of classes, I stumbled upon the Entrepreneurship Through Acquisition course being offered in the winter and decided to take the class. I knew about search funds vaguely from the time I researched different MBA programs, but I went into the class with few expectations. It turns out that it was love at first sight, and that class helped me prepare for where I am today.
However, I noticed that many students in business school find out about ETA too late to pursue the path immediately after graduation. Many discover ETA in their second year or indirectly at some point, and even though they may fall in love with the idea of running a small business, they have already signed offers to a more traditional post-MBA role.
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My goal is to share specific coursework that will benefit prospective searchers. These are anchored on my direct experiences at Booth, but I found that many other business schools offer similar, if not the same, courses. They’re meant to help prospective searchers build out their skill set to maximize their odds of success if they decide to pursue a career in ETA. However, these courses will benefit anyone looking to break into investing, entrepreneurship, or consulting roles.
Entrepreneurship Through Acquisition
The first and most obvious choice, a class in ETA is necessary for anyone remotely interested in the career path. Students should expect to learn the theory of ETA, the trade-offs between each of the models, processes of a search fund, challenges faced by first-time CEOs, and best practices.
The course will validate whether you are interested in pursuing a search fund at some point in the future. Also, it’s a great, risk-free environment to network with others in the community, including aspiring searchers, investors, and professors. Suppose your school does not offer its own ETA course. In that case, I recommend taking classes in Private Equity, Corporate Finance, and Mergers and Acquisitions in conjunction with the resources available in my Educating yourself on ETA post from a while back.
We are constantly selling every day. Classes related to sales in an entrepreneurial setting may vary by name across business schools but are crucial for any budding entrepreneur. You will learn frameworks for selling in the context of having no proof of concept, experience, or reputation to make the sale. It will also teach you how to efficiently qualify potential leads and develop a sense of listening to others.
Why take a class on sales? Learning it formally will disarm you from thinking of that ‘used-car salesman’ stereotype we all know and begin to help you connect with others. In the search fund context, this ‘customer’ will be the business owner you are trying to buy a company from and the various customers you will work with as a CEO. If your school does not offer a course in sales in an entrepreneurial context, I recommend checking out this article from Kauffman Entrepreneurs, To Sell is Human by Daniel Pink, and Influence by Robert B Cialdini.
Finance and Accounting
Whether you are valuing an acquisition opportunity or operating as the CEO, a fundamental understanding of corporate finance is essential to every search fund entrepreneur. A corporate finance course will help you understand how projects and businesses are valued through discounted cash flow (DCF) and adjusted present value (APV) analyses, the trade-offs between different types of capital structures, the weighted average cost of capital (WACC), and more.
A crucial job as the CEO is capital allocation, and a course in corporate finance will help you identify where sources of value lie within an organization. Most schools should have multiple courses on corporate finance, but if you have graduated or are pursuing a search without an MBA, I recommend reading Damodaran on Valuation by Aswath Damodaran and Corporate Finance by Jonathan Berk and Peter DeMarzo.
Private Equity and Venture Capital
Many business schools offer Private Equity and Venture Capital courses, which are essential for aspiring searchers. Some business schools group PE and VC into one class, but most MBAs can find multiple courses in each industry. You can expect to learn frameworks for evaluating industries and businesses, the mechanics of financing a transaction in an all-equity fundraising round and a leveraged buyout, and financial modeling.
I took this course and came away with a better understanding of the role of incentives - both for entrepreneurs, the teams around them, and their investors. Many features in ETA closely resemble private equity activities, most notably the pursuit of business ownership through a leveraged buyout. Considering that many in the ecosystem are closely associated with private equity firms or have traditional buyout funds under the firm partnership, taking a course on the topic will provide a better perspective on how your investors consider investment opportunities in ETA. I recommend reading Mastering Private Equity by Claudia Zeisberger, Michael Prahl, and Bowen White if you cannot take such a course.
Mergers and Acquisitions
Mergers and acquisitions (M&A) will teach aspiring searchers the nuts and bolts of a transaction, where the strategic value lies in doing so, and some of the challenges associated with buying companies. Many search CEOs aim to grow their top and bottom lines through serial acquisitions, popularly known as ‘buy and build’. Further, the course should help you deepen your understanding of the acquisition process for the initial transaction. If you cannot fit an M&A course in your schedule or your circumstances, do not allow you to, check out the following book: Mergers, Acquisitions, and Corporate Restructurings by Patrick A. Gaughan.
Financial Statement Analysis
A course in Financial Statement Analysis is often structured for public equities but will help students understand the relationship between the three key financial statements and how to value a company. This course is practical in evaluating companies and their financial statements, deepening my understanding of valuation concepts (primarily DCF and APV) and knowing how incentives drive managerial decisions within a firm. Although students in this course would analyze publicly traded companies using their 10-Ks and proxy statements for insights, Financial Statement Analysis gave me the fundamentals and confidence to properly value a business in a search fund setting. Here, I would stick with Damodaran’s book on Valuation for further detail.
Leadership and General Management
For those unfamiliar with design thinking, it is a “design methodology that provides a solutions-based approach to solving problems.” The process is rooted in deeply understanding the customer’s needs which is beneficial for any aspiring leader. A course in Design Thinking or New Products and Services will teach you concepts about the customer journey, identifying customer needs, prototyping, improving creativity, and much more. For a searcher, learning a systematic approach to developing new products or services in a small business can help them unlock value at a more efficient rate than otherwise since the practice is grounded on the customer, not our opinions.
I found that we all tend to project our solutions onto specific problems we see professionally or personally in our own worlds while failing to consider why someone is behaving a certain way. Implementing a design thinking approach into your business’s operations will force you to consider the customer first and frequently test out new ideas. I recommend Designing for Growth: A Design Thinking Toolkit for Managers by Jeanne Liedtka and Tim Ogilvie for a framework that searchers can leverage within their days as an operator.
A class on corporate governance is directly relevant to your career in ETA. As the CEO, you will have a board of directors to report to, some of whom were investors from your search fund. In a governance course, you will learn about the roles and responsibilities of the board, board formation, critical court cases and legislation related to governance, and more. If you have never sat on a board before, the course will provide insight into what to expect in board meetings and corporate strategy at the board level. I recommend looking at the same Mergers, Acquisitions, and Corporate Restructurings book from the M&A course to learn more.
Leading Teams and Organizations
Much of the leadership development will occur on the job as a searcher, but there are ways for MBAs to build skills through a course on general management and leading teams. A course in general management will teach the roles that power, politics, motivation, and culture play on a firm’s performance and how to influence others in a corporate setting. Organizational structure will vary across firms, but the same behavioral factors will affect the people who work there. Many lists provide their favorite books related to leadership and management, so I will not duplicate those. However, How to Win Friends & Influence People by Dale Carnegie would be a top choice for me to recommend if you do not know where to start.
I hope you find these courses and explanations helpful as you prepare for a career in ETA. There are many more relevant topics that one could take electives in, but I will leave that up to the individual based on their interests. One final piece of advice that I have is to focus on coursework that will support not only your career as a searcher but also your weaknesses. Business school is the perfect platform to develop a more well-rounded skillset, so don’t hesitate to take that advanced operations course or interpersonal dynamics class that gives you anxiety. It’ll be one of the last opportunities you have in life to fail in a risk-free environment.
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