The IESE Business School Q&A

You’ve heard of venture capital, private equity, and angel financing. Now how about search funds?!

 

Hawaiian-born, Yale-educated Francisco Liquido has headed to IESE Business School Spain to prepare for the launch of his very own search fund. 

 

The idea of search funds was conceived in 1984 as an investment vehicle in which investors financially support an entrepreneur’s efforts to locate, acquire, manage and grow a privately held company. IESE is one of the few international business schools that supports entrepreneurs and investors who engage in search funds. 

 

Francisco, 26, joined the IESE full-time MBA earlier this year. He majored in Political Science at Yale University but cut his teeth in the finance world working for the likes of Mitsubishi-UBS, Lehman Brothers Real Estate Partners, Bessemer Trust - a wealth management and investment advisory firm, and AlpInvest Partners, a private equity firm. 

 

Actually, I have to say that when I first told my parents this was what I wanted to do they were puzzled too. Search funds allow entrepreneurs with little experience to own and manage their own companies without starting from scratch.

 

I’m interested in quick service restaurants so a search fund allows me to look for companies to buy and set acquisition criteria. When you buy them you can manage them from anywhere from three to 20 years before either selling them or hanging on to them. 

 

I started a company in college and it did quite well. The company was called Campus Bus. Yale had a really poor transport network so we arranged to sell bus tickets to take students to airports during school breaks and at the beginning of sessions. Over 25 per cent of Yale undergraduates used the service in the first year. We ran it without making a profit because we offered it as a service to other students.

 

We sold tickets at cost price and kept it at a zero profit model until Yale acquired the concept from us. The Dean of Student Affairs was surprised we had pulled this off and asked to acquire it. The service still exists today. 

 

Convincing the companies to sell will be a major challenge. I think the easiest part should be raising the search capital but the hardest part should be finding the right company to buy at the right price. If it’s a small- or medium-sized family owned business, there’s a lot of sentimental value attached to it. It might also take a while uncovering the operational details. I’ve started a search fund called www.kahokia.com and it’s still in prelaunch mode.

 

IESE is very intense academically but I’m in touch with a search fund in Barcelona and we’re in talks to figure out how I can work with him. I am actively talking to potential investors and I have between one and five video conferences lined up each week. I think it's important to foster these relationships so that when you’re ready to launch, they believe in you. 

 

Social media and cloud computing are very exciting for investors right now. The main issue being discussed is how to commercialize social media and make that jump from just people connecting to receiving the monetary rewards from the value of these services. 

 

Cloud computing comes in because computers are now more like terminals where we pick up from where we left off. Things like Google docs and Drop Box make it easier for us to work from any computer. Those invested in cloud computing are thinking of ways to make these services cheaper and more efficient. 

 

I went to Yale for my undergrad and spent four years in finance. While I was at Yale I did an exchange programme in Beijing and realized that being pushed out of your comfort zone takes you places. When it was time for my MBA I knew I wanted to study abroad. I chose IESE because I could study abroad without diluting the brand names on my resume. 

 

IESE and Stanford GSB are the business schools best known in the search fund world. IESE hosted the first international search fund conference this year and the most recent Economist Which MBA rankings rated it number 1 in Europe and number 9 in the world. American students usually question going abroad but after I visited the IESE Campus in NY I was good to go. 

 

IESE is a very vibrant community. We’ve got these sessions that are similar to Dragon’s Den. Angel investors come in and you can pitch your ideas to them. I'm learning so much from them. I’m also enjoying networking with our professors; finding out more on what I should be studying and reading. They teach you things like how to create memorable experiences through 30 second conversations that create emotional value and connections.