The 2024 Stanford Search Fund Study reports a 35.1% IRR and 4.5x ROI across 681 funds tracked since 1984 in the US and Canada. The model that produced those numbers is straightforward: an entrepreneur raises a small amount of capital to fund a two-year search for a profitable SME to acquire, then raises acquisition capital to buy it and runs it as CEO. The searcher gets carried interest. The investors get asymmetric access to operational returns that venture capital structurally cannot reach. The business gets a full-time, highly motivated operator who bought in specifically to run it.
Those returns have been durable across multiple decades and economic cycles. In Southeast Asia, almost nobody is running the model.
What Problem the Search Fund Model Is Actually Designed to Solve
Search funds exist to address a specific market inefficiency: profitable, established businesses that owners want to exit but cannot sell cleanly because they are too small for institutional PE, too owner-dependent for strategic acquirers, and too operationally complex for passive investors. In the US, this describes a generation of baby boomer business owners whose succession problem became a structural opportunity for acquisition entrepreneurs.
In Southeast Asia, the same dynamic is forming. The region has a deep base of founder-owned SMEs built over the last three decades (manufacturing businesses, B2B services companies, distribution networks, logistics operators). Many are profitable and well-run. Many face succession questions that no one has a clean answer to. The owners are aging. The children have gone into finance or tech. The business is generating S$2–5 million in annual earnings and the owner has no natural buyer.
Where the Structural Friction in SEA Search Funds Actually Sits
The underuse of search funds in SEA is not a returns problem. The IESE 2024 International Search Fund report tracks 320 international funds and documents a 2.0x ROI and 18.1% IRR for the international cohort, lower than the US figures, but still a compelling risk-adjusted return for the asset class, with top performers returning 31.4x invested capital. Seventy-nine percent of international search funds have successfully acquired companies, outperforming the US acquisition rate of 63%.
The friction is structural and clusters in four places.
First, debt financing. The US search fund model assumes access to SBA-backed acquisition loans that cover 80–90% of purchase price at reasonable rates. In Singapore and Malaysia, that infrastructure does not exist. Traditional banks are unfamiliar with search fund acquisition structures. Private debt is available but more expensive. This compresses the return math and shifts the equity requirement. The deal sizing has to adjust accordingly. Searchers trying to run a US playbook in a market without US financing rails will hit a wall fast.
Second, deal flow generation. A US-based searcher can use fairly standard outbound processes (cold email to NAICS codes, business broker relationships, accountant referral networks) and generate a reasonable volume of qualified opportunities in 12–18 months. In SEA, the equivalent infrastructure is thinner. Business brokers are less systematized. Owner relationships require local trust-building that takes longer. As Moonbase Capital-backed searcher Gustav Astrom, operating in Malaysia, described the dynamic: debt is harder to access, investor education takes longer, and without a track record of regional acquisitions to point to, trust-building with both owners and backers extends the timeline.
Third, valuation expectations. In the US, median search fund acquisitions close at 7.0x EBITDA according to the Stanford study. In SEA, where comparable PE deal context is less established, seller expectations are often either anchored too high by aspirational comparables or too low by distressed-exit logic. Less exists in the middle ground where a rational, clean transaction gets done. Finding a business priced at 4–6x EBITDA with clean financials and a real owner-operator willing to transition out is doable but requires more sourcing to surface.
Fourth, the awareness gap. In the US, search funds are a known concept in MBA programs, PE circles, and the SME advisory ecosystem. In Singapore and Malaysia, most accountants, business brokers, and even many investors have never encountered the model. Every searcher here is doing partial category education alongside deal sourcing. That is a tax on time and credibility that US searchers do not pay.
Why the Timing for Search Funds in SEA Is Better Now Than in 2024
The Moonbase Capital $15 million fund-of-funds vehicle launched in 2024 is the clearest signal that capital is beginning to organise around this opportunity. The vehicle backs individual searchers across emerging markets including SEA, with a structure that addresses the investor education problem by putting informed capital alongside each search. When the backer already understands the model, the searcher spends less time explaining it to every potential investor in their cap table.
Singapore and Malaysia are also increasingly active in middle-market M&A in ways that were not true five years ago. Kenneth Cheng, a Singapore-based searcher backed by Moonbase Capital, points to significant momentum picking up in 2024 across both markets at the middle and lower-middle market level. The deals are happening. The question is who is positioned to do them with the right operator thesis rather than the wrong financial buyer thesis.
For a searcher with strong operational instincts, sector knowledge in a specific vertical, and the patience to build owner relationships over 12–18 months, the conditions in SEA right now are analogous to where the US search fund market was in the early 2000s. Deal competition is low enough that you can surface opportunities, and exits are developed enough that you can see them.
What a Successful Search Fund Operator in Southeast Asia Looks Like
The profile that works in the US (recently graduated MBA, strong analytical background, minimal operational experience) does not port cleanly to SEA. Owners here are not going to hand their life’s work to someone whose only qualification is a top-tier degree and a financial model. The trust-based business culture of the region means the searcher needs either deep sectoral credibility, relevant operational history, or both.
The SEA opportunity favors searchers who have already run something (ideally in the sector they are targeting) and who are looking for a capital-efficient path to owning a profitable business rather than a zero-to-one startup build. That profile is not rare. It describes a large cohort of operators in their mid-to-late thirties who have spent a decade building other people’s businesses and are tired of the equity dilution that comes with taking a salary in someone else’s company.
The search fund model is one of the cleanest ways for that cohort to get on the right side of the ownership equation. It is underused in SEA not because the returns are poor or the businesses are not there. It is underused because the model has not had its moment of widespread understanding yet.
For context on how the broader capital landscape in SEA has been shifting — with implications for where acquisition and private capital flows — see our analysis of Hong Kong to Singapore capital repositioning. For a related read on the profitability-first path that complements the acquisition entrepreneurship model, see our bootstrapped founders piece.
Sources:
- 2024 Search Fund Study — Stanford Graduate School of Business
- International Search Funds 2024: Selected Observations — IESE Business School
- Moonbase Capital Launches $15M Search Fund Targeting Emerging Markets — The Startup Scene
- Searching in Southeast Asia: A Conversation with Gustav Astrom — Moonbase Capital
- From Corporate Ladder to Search Fund Pioneer: Kenneth Cheng’s Journey in Southeast Asia — Moonbase Capital
