---
title: "Search Funds and ETA | Gautam Basu | Neuvottelija 7"
summary: "Gautam Basu introduces Sami Miettinen to Entrepreneurship Through Acquisition, the model where you become an entrepreneur by buying an established company rather than founding a new one. The episode covers the three routes into the model, the True North Search accelerator concept, and the demographics behind it: 30 per cent of Finnish entrepreneurs are 55 or over and up to 40 000 companies are looking for a new owner. Basu opens up the search criteria, the funnel from 300-500 targets down to one acquisition, and why the market at 2-20 million euros of enterprise value is inefficient and opaque - and therefore priced at three to five times EBITDA. Also included are the US figures on how many searches fail, the psychometric assessment of candidates, and the question of who a seller actually wants to hand their life's work to."
datePublished: 2020-03-06
dateModified: 2020-03-06
originalLang: en
section: economy
sections: ["economy","tools"]
authors: ["Sami Miettinen"]
tags: ["Negotiator","EP7","Sami Miettinen","Gautam Basu","ETA","Search fund","M&A","Business succession","True North Search","Impact investing"]
canonical: https://ai.neuvottelija.com/ep7-search-funds-ja-eta-gautam-basu/
---
# Search Funds and ETA | Gautam Basu | Neuvottelija 7

# Search Funds and ETA | Gautam Basu | Neuvottelija 7

> **Summary:**
> The channel's **first English-language episode**, 25 minutes, and in effect a primer on a model barely known in Finland at the time: **Entrepreneurship Through Acquisition**, or ETA.
>
> Its hardest single observation is about the nature of the market: **the 2–20 million euro enterprise value segment is inefficient and opaque** — and precisely for that reason the multiples are three to five times EBITDA rather than more.
>
> And its most honest passage is Basu's own caveat: **the model is simple but it is not easy.** In US data, 31 per cent of searchers never find a company within 24 months.

**A note on reading this.** This is Miettinen's first episode recorded in English, and he says so. Basu is behind **True North Search**, so he is also selling his own concept here; Miettinen for his part offers pro bono help on negotiation and valuation questions. Both connections are disclosed openly in the episode and are worth knowing. A full treatment of the subject exists as a separate guide; this article covers what the episode itself contains.

---

## Who Basu is

Miettinen explains that they met through a mutual friend, **Marko Tamminen**, with whom he worked in London.

Basu's own introduction is brief and unusual: **born in Germany to Indian parents, holds a US passport, lives in Finland.** His background is in supply chain and operations management — **20 years as a management consultant**, doing performance improvement and transactions. Then he switched sides: entrepreneur, investor and operator. In Finland he is an *executive in residence* at Aalto University.

## ETA in a nutshell

Basu's definition is compact and worth reading whole, because the whole model follows from it:

> For those of us who do not have a unicorn idea or the desire and motivation to start a business from scratch, **entrepreneurship through acquisition provides a way to fulfil that ambition.** An aspiring entrepreneur can search for, acquire, lead, operate and grow an established business.

The difference from the startup route is the risk profile. The company being bought already has **cash flow, revenue and a customer base**, whereas in the startup world *nine out of ten fail*. The returns, on Basu's account, are quite good compared with venture capital, angel investing or traditional private equity — measured on the same yardstick, the internal rate of return.

## Three routes

This is the episode's clearest structural passage, and worth remembering because in public discussion "search fund" usually means only the first:

1. **The search fund.** Capital is raised from a selected pool of investors who buy units and fund a **12–18 month** runway to search and acquire. The model was pioneered, on Basu's account, by **Irv Grousbeck** of Stanford Business School.
2. **The self-funded search.** The aspiring entrepreneur funds the search and acquisition phase themselves.
3. **The accelerator.** A partnership giving access to expertise, knowledge *and* capital.

Basu's own concept, **True North Search**, is the third route. Its rationale is a gap in the market: traditional ETA models took off in the US around the elite schools — Stanford, Harvard, Chicago. Basu teaches at a business school himself and points out what makes the gap structural:

> Most business schools do not teach how to buy or sell businesses.

Miettinen's response: *definitely not in Finland.*

## Why now

The demographic argument is what makes the subject Finnish rather than borrowed:

| | |
|---|---|
| Finnish entrepreneurs aged 55 or over | **~30 %** |
| Retiring within the next | **10 years** |
| European business value at risk of being lost | **~EUR 7 trillion** |
| Finnish companies seeking a new owner | **up to 40 000** |

The logic is simple: without a succession plan or a son or daughter to take over, **those businesses go by the wayside.**

The same phenomenon repeats, on Basu's account, in the Baltics and particularly Estonia: companies founded in the 1990s after separation from the Soviet Union are now at the same succession point. True North Search's geographic scope is accordingly Northern Europe — Finland, Sweden, Norway, Denmark and the Baltic countries.

## Basu's own acquisition — and where it departed from the model

Basu describes an acquisition he made in the US in energy services. It was successful, but he flags the exception immediately: **it was a turnaround**, not a classical ETA target, since the model calls for steady cash flows and revenue.

Miettinen's reading is that the operations background gave the confidence that the company could be improved — and Basu's answer widens that into a principle:

> With this model, either way you are going to have to roll up your sleeves and go down to the shop floor and do the nitty-gritty stuff. **That is part of leadership.**

The other variant is **buy and build**: acquire a platform company first and add bolt-ons on top.

## What kind of person this suits

This is the episode's most usable passage, because it is specific rather than flattering.

**You do not need to be a top MBA.** Miettinen's formulation is that being down to earth actually helps, and that the programme puts a person through a *Jedi academy* where they are taught to buy and run companies. Basu agrees: the core skills can be taught.

**Hard skills.** Basic finance and accounting: what a P&L is, what a balance sheet is. Fundamentals that can be taught.

**Soft skills.** Leadership in a transition environment — and **persistence**. When Basu says *grit*, Miettinen supplies the Finnish equivalent: **sisu**. The reasoning is concrete: during the 12 to 18 month search you have to reach out to companies, and that means **cold-calling strangers**. *It is not the hardest thing, but you have to do it.*

**Age.** Someone in their late twenties can do well, but Basu says a person in their forties who has done line work is a particularly good candidate.

**Psychometric assessment.** Candidates are also screened by testing. Basu's reasoning is even-handed: *everybody has blind spots.* One comes from finance, another from operations, a third from sales and marketing — that is their strength, but what matters is identifying **where a person needs help and where they can develop.**

And one thing that sets this apart from ordinary accelerator talk: True North Search works with **performance psychologists**, because a search can be lonely and burn people out. *Well-being is very important to us.*

## The search: strategy, funnel, criteria

The process Basu describes is the episode's most concrete section.

**First a search strategy and investment criteria.** A typical target: **EUR 2–20 million in revenue**, EBITDA around **10 per cent** if you want a relatively healthy business — plus a chosen industry sector.

**Then the funnel:**

**300–500 targets → 100 → 20 → letter of intent → due diligence → one.**

Miettinen's dry interjection sums up the logic: *you only need one.* And the qualification that matters: **you cannot have two, because you have to commit.**

**And then you negotiate** — the purchase price. This is where the episode connects to the channel's own subject.

## Why the market is cheap

This is the analytical core, and Basu presents it as a causal chain rather than an opinion:

> The beautiful thing about this market is it is **highly underserved.** With companies of enterprise value of 2 to 20 million, it is a **highly inefficient market. It is highly opaque.** So the multiples are a lot more attractive as well.

In practice **three to five times EBITDA**. Miettinen adds that deferred payments may also be part of it.

**The financing stack** is, on Basu's account, deal-specific: traditional senior debt, some seller financing and of course equity.

The funding side is equally flexible. Miettinen sketches two models: a loose *ad hoc* consortium in which people interested in a sector sponsor one entrepreneur without a formal fund — or the more professional route of conditional commitments from investors. Basu's answer is the same to both: *it is really up to the individual searcher. We support them along the way, but in the end they do the work.*

## Simple but not easy

The episode's most important caveat, and Basu offers it himself without being asked. From US data:

- **31 per cent** of searchers **do not find a company** within 24 months.
- **11 per cent** of those who do acquire **fail to create optimal value** after the transaction.

Which is why True North Search works with the searcher through the whole cycle: after the acquisition comes *operate and grow*, the operational improvements and revenue growth strategies.

And what remains even when it fails is, on Basu's account, real: **human capital and experience**, valuable in themselves.

## Is this exploiting the seller?

Miettinen puts the uncomfortable question directly: a trained buyer negotiates with a seller who has never been in a deal — cannot you make far too good a bargain out of that?

Basu **concedes it without hesitation**, and it is the episode's most honest moment:

> That is typically the case. That is a great point. These folks who are retiring — this is their life's work, their legacy, and they have never been in a transactional or deal environment. So obviously we are at **a bit of an advantage in the negotiation.**

But the counter-question matters: **what is the alternative?** Miettinen answers it himself — the alternative is winding the business down for liquidation value, which is very low. And many owners *do not want* to run their life's work into the ground; they want it to succeed.

Which brings the episode's joke, which Miettinen flags as a bad one himself:

> When a man with money meets a man with experience — **the man with experience leaves with the money and the man with money leaves with an experience.**

## Why value is so easy to create

Basu's description of the typical target is ETA's most concrete promise: they **have not modernised**. *The website looks like it is from the 1990s.*

He offers an American sporting analogy and Miettinen a Finnish one: **blocking and tackling** — or in hockey terms **skating and puck handling**. Very, very basic stuff.

Which produces the episode's most quotable line:

> I like to say it is not even low-hanging fruit — **the fruit is on the ground.**

## So why is this not happening already

Miettinen asks the question that matters most for the whole episode: if it is this good, why is it not already common?

The answer is structural: **the deals are too small.** The model does not scale into the hundreds of billions in Europe, and in Finland perhaps only into the tens of millions — so the bigger funds may not want to do it. It also requires commitment from everyone, since people have to be trained.

From which follows the frame Miettinen supplies: **this carries an impact investing stamp.** The social effect is direct and the market segment is underserved.

Basu confirms it and adds a competitive observation: private equity firms are moving ever further down in enterprise value. But his counter-question is the one that decides deals in practice:

> When you talk to an entrepreneur selling their business, their life's work — **do you want to sell to a private equity company to be put into a portfolio, or do you want a person there who cares about the employees, their business, their customers?**

## What ETA solves that private equity does not

Here Miettinen draws on his own field for the episode's sharpest comparison. In a private equity deal the current owner often continues as an owner initially and reinvests their money — and if management has to be changed later, **it can be quite ugly**, because in effect the former owner-CEO is pushed out.

In the ETA model the problem is solved immediately, because **the buyer arrives with the management** — in practice the CEO. And not necessarily just one: Basu confirms that **two-person search teams are quite common**.

And among searchers a community forms that is part of the product rather than a by-product: a network, peer support, and attention to well-being.

## Closing

The episode ends on practicalities: Miettinen offers pro bono help on negotiation and valuation, and Basu invites the interested to an early-April event at the **Aalto School of Business in Otaniemi**. Miettinen describes an earlier session as a full house.

Both mark the episode as **a primer**: a follow-up is possible if the subject interests people. And Miettinen leaves open a question the channel has since answered: *we will see if I do more English episodes.*

---

## What the episode leaves you with

1. **The segment's inefficiency is the source of the whole model.** Three to five times EBITDA is not good negotiating; it is the consequence of there being no buyers in the market.
2. **31 and 11 per cent are the right antidote to enthusiasm.** Basu volunteers them, which makes the rest more credible.
3. **The seller's choice is not only about price.** It is the episode's one argument not based on numbers — and probably the one that decides the most deals.

## Related articles

- [Becoming an Entrepreneur by Buying: The Complete Map of ETA and the Search Fund](https://ai.neuvottelija.com/eta-yritysostoyrittajyys-opas/) — the full treatment, built on this episode and episode 14.
- [Negotiating an ETA Acquisition | Gautam Basu and Mikko Järvinen | Neuvottelija 14](https://ai.neuvottelija.com/ep14-eta-yritysosto-gautam-basu-mikko-jarvinen/) — the follow-up, going into negotiation and deal structure.
- [The Exit Process and M&A | Tero Nummenpää | Neuvottelija 26](https://ai.neuvottelija.com/ep26-exit-prosessi-ja-yrityskaupat-tero-nummenpaa/) — the same transaction from the seller's side.