One of the quickest paths to entrepreneurship is to acquire an existing business, rather than building one from scratch. An ecosystem is rising around the idea, known as “Entrepreneurship through Acquisition,” or ETA, to help would-be entrepreneurs source, vet, purchase and manage businesses.
The wave of retiring baby boomer owners of businesses with trillions of dollars in wealth is supercharging the growth of ETAs. Search funds, an investor-backed model that enables entrepreneurs to gain up to a 30% stake, have surged in popularity. More than 700 search funds have been launched globally since they were pioneered at Stanford University in the 1980s. More than $682 million of ETA equity capital was deployed in the US and Canada between 2022 and 2023 alone.
Such ETA models can chart a course to business ownership and generational wealth and ease the wave of retiring baby Boomer business owners. But too often, ETAs benefit the well-connected few and do not consider a business’s impact. Just 17% of search fund entrepreneurs in 2023 were women, and only 8% identified as Black.
“ETA is a fast-growing, under-the-radar investment opportunity that a lot of us have our eye on,” says Julie Menter of Transform Finance. “As it scales, it really matters for investors to think about their roles in shaping what it becomes.”
That means rethinking who gets to acquire, which businesses are targeted, and how they are run after acquisition.
Transform Finance is proposing a mission-first twist on the ETA called Social Entrepreneurship through Acquisition, or Social ETA, that would create greater access to business acquisition opportunities and empower aspiring entrepreneurs to embed social impact considerations into every stage of the ETA process.
In a new report, “Social Entrepreneurship through Acquisition (sETA): A Guide for Impact Investors to the Growing ETA Market,” Transform Finance lays out the blueprint for the Social ETA: the model would train aspiring entrepreneurs from diverse pipelines to go out and buy a business, primarily a social enterprise, and scale in an impactful way. That includes creating pathways to upward mobility for workers through profit sharing and employee ownership plans, as well creating good local jobs to keep businesses anchored in their communities.
It’s an alternative to the traditional ETA, which were driven by the main mission of acquiring businesses and boosting their profitability to generate attractive returns for investors upon an exit. By rewarding workers for the value they help create for the company, the entrepreneurs and their backers would benefit from long-term sustainable value creation through the Social ETA.
Ownership Economy
Innovators are already showing the way.
New Majority Capital, based in Rhode Island, trains, finances and provides back-office support to underrepresented founders to break into ETA (for context, see, “Through small business acquisitions, New Majority aims to create ownership access for underrepresented entrepreneurs”).
Scaling capital to meet demand remains a challenge. New Majority, which has raised capital from the Skoll and Philadelphia foundations, has scaled back the target size of the private equity fund it is raising to $15 million (from $50 million).
New Majority’s Havell Rodrigues told ImpactAlpha last year that “this is a one time opportunity to help take an existing good cash flow generating business, treat it as an asset and help transition ownership of that asset to an underrepresented entrepreneur.”
Through its bETA accelerator, New Majority offers a 10-week program that first provides entrepreneurs with training on how to acquire, run and scale an existing business. The program includes an impact management track that mirrors the characteristics of the Social ETA.
“We are aligned with using ETA to drive impact by funding underrepresented entrepreneurs, mandating a profit-share program with employees and promoting the use of a good jobs strategy framework,” says Rodrigues.
Village Search Partners, launched in 2024, is among the first search funds to focus on women entrepreneurs. It also offers a community of women operators, executives and mentors to provide support. Boston’s ten-year old Search Fund Accelerator trains and supports diverse cohorts of entrepreneurs to become equity-owning CEOs.
In Canada, Regenerative Capital Group also takes a gender-lens approach to ETAs, training and supporting women entrepreneurs, as well as a focus on shared business ownership and environmental stewardship.
Early iterations have also been used in Newfoundland and Labrador.
Transform Finance views Social ETAs as complementary to employee ownership transitions, particularly when business owners can’t or won’t sell their business to its employees.
“As a generation of business owners retire, the question we all have to face is what is the future of business going to look like,” says Christopher Egi, co-author of the report and student at Harvard’s business and law schools.
“It could look like more of the past, which was predominantly white male and very concentrated in the hands of a few,” he told ImpactAlpha. “Or it could like we’re moving in a more diverse future of business and ownership, where the gains from the work of many is shared among many and impact is not just about profits and bottom lines, but about what you’re doing for community.”
“Social Entrepreneurship through Acquisition,” he adds, “is one way to achieve that goal.”
