---
title: "Becoming an Entrepreneur by Buying: The Complete Map of ETA and the Search Fund"
summary: "Entrepreneurship Through Acquisition, or ETA, is a career path where you become an entrepreneur by buying an existing, profitable and boring company instead of founding a new one. This article assembles the whole model: the jockey–horse–trainer structure, the four stages of search, acquire, operate and exit, the three funding routes, target criteria of €2–20 million in revenue at roughly ten per cent EBITDA, the screening funnel from hundreds of targets to a single deal, and the sobering US base rates. It also covers deal valuation on EV/EBITDA multiples, the discounts that push the entry price down, the financing stack, and the full negotiation lesson: the win-win versus No Deal quadrant, the four levers of negotiation, signalling, and the Columbo tactic for gathering information."
datePublished: 2021-11-13
dateModified: 2021-11-13
originalLang: fi
section: economy
sections: ["economy","tools"]
authors: ["Samantha"]
tags: ["ETA","Entrepreneurship Through Acquisition","search fund","acquisition","entrepreneurship","business succession","valuation","EBITDA","negotiation","True North Search","Gautam Basu","Mikko Järvinen","Sami Miettinen"]
canonical: https://ai.neuvottelija.com/eta-yritysostoyrittajyys-opas/
---
# Becoming an Entrepreneur by Buying: The Complete Map of ETA and the Search Fund

# Becoming an Entrepreneur by Buying: The Complete Map of ETA and the Search Fund

> **Summary:**
> Entrepreneurship Through Acquisition, or ETA, is a career path where you become an entrepreneur by buying an existing, profitable and boring company instead of founding a new one. This article assembles the whole model: the jockey–horse–trainer structure, the four stages of search, acquire, operate and exit, the three funding routes, target criteria of €2–20 million in revenue at roughly ten per cent EBITDA, the screening funnel from hundreds of targets to a single deal, and the sobering US base rates. It also covers deal valuation on EV/EBITDA multiples, the discounts that push the entry price down, the financing stack, and the full negotiation lesson: the win-win versus No Deal quadrant, the four levers of negotiation, signalling, and the Columbo tactic for gathering information.

This article is assembled from the two Neuvottelija episodes that covered the subject: [Search Funds and ETA | Gautam Basu | Neuvottelija 7](https://ai.neuvottelija.com/ep7-search-funds-ja-eta-gautam-basu/) and [Negotiating an ETA Acquisition | Gautam Basu and Mikko Järvinen | Neuvottelija 14](https://ai.neuvottelija.com/ep14-eta-yritysosto-gautam-basu-mikko-jarvinen/). The latter is a recording of True North Search's first webinar, originally planned for the Aalto University School of Business and moved online because of the Covid-19 situation in spring 2020. The figures and claims are those presented in the episodes, sourced as such, and have not been updated since the recording.

## The third route into entrepreneurship

There are usually two ways people talk about becoming an entrepreneur. Either you found a company from nothing, or you inherit one. ETA is a third route, and it is by far the least romanticised of them: **search for, acquire, lead, operate and grow an existing business**.

The difference from the startup path is structural rather than a matter of taste. In a startup, the product, the market, the customers, the cash flow and the organisation all have to be invented at the same time, and the odds of failure are high. In ETA the target is **an existing company that already has revenue, cash flow, customers and suppliers**. Product-market risk is largely gone. Two other risks take its place: whether you find a target at all, and whether you can run it.

The model was developed in the United States at Stanford University in the mid-1980s. Irv Grousbeck is regarded as its originator. That origin explains the model's sociology: it grew up around the elite business schools — Stanford, Harvard, Chicago — and for a long time its typical practitioner was a freshly minted MBA. The practitioner base has since aged. Increasingly the person taking this path is a long-serving manager looking for an alternative to corporate life.

One of the more interesting background observations in the model is that **most business schools do not teach the buying and selling of companies at all** — even though that is precisely the event in which ownership and wealth change hands.

## Jockey, horse, trainer

The basic grammar of ETA has three parts, and it is worth using as-is, because it separates three things that are easily conflated.

**The jockey** is the entrepreneur. They start the search, do the deal, and become the CEO of the acquired company.

**The horse** is the company to be bought. It is established, it already has revenue, and it exists whether or not anyone buys it.

**The trainer** is the support structure: an investor, an advisor or an accelerator backing the jockey through the journey.

The model's core question is neither party in isolation but the **jockey–horse fit**. A good rider on a bad horse does not win, and a good horse does not improve a bad rider. The trainer's job is specifically to screen for that fit — not merely to finance the deal. In practice this means the searcher is assessed before any targets are looked at: psychometric testing, evaluation of hard and soft skills, and that quality for which Finnish has its own word — **sisu**.

## Four stages and their time horizon

The whole process takes **five to ten years**. This is the first thing to internalise, because it realistically rules out a large share of potential candidates.

### 1. Search (12–18 months)

The search phase is unique to ETA. It is a full-time job with no income. The searcher works through hundreds of potential targets, meets sellers, runs preliminary analysis and builds a pipeline.

### 2. Acquisition

A target is chosen, due diligence is done, financing is arranged, terms are negotiated and the deal closes. The phase ends with the searcher becoming an owner.

### 3. Operating and growing

Here the entrepreneur becomes CEO of the acquired company. The work is improving operational efficiency and growing revenue. This is the longest stage of the model, and the one in which value is actually created.

### 4. Exit

A liquidity event typically arrives **four to seven years after the acquisition**, and there are two routes. The company is sold to a third party, or the entrepreneur chooses a **recapitalisation**: buying the investors out and continuing to run the business for as long as they wish. The latter matters, because it separates ETA from private equity — not every path has to end in a sale.

## Three ways to fund the search

The search phase costs money, and there are three models for paying for it.

**Funded search.** Investors buy units in a search fund, and the searcher gets a paid runway of 12–18 months to find a target. This is the classic search fund. In return the investors get the right — but not the obligation — to invest in the acquisition itself, and the search capital typically converts on favourable terms. The model ties the searcher to an investor base from day one, which is simultaneously its advantage and its constraint.

**Self-funded search.** The searcher pays for the search out of their own pocket. More freedom, more ownership in the outcome, and considerably more personal risk. In practice this requires either savings or a very short search.

**Accelerator partnership.** The third route is to join an accelerator that pools the resources of the search phase across several searchers: target sourcing, analytics, a financing network, coaching. True North Search is an example of exactly this model in Northern Europe. The accelerator also builds a community around its searchers — including support from performance psychologists, which sounds like a luxury until you remember the search phase is 12 to 18 months of rejection.

## Why now, and why here

ETA's spread into the Nordics and the Baltics is not a fashion. It is demography.

The figures given in the episodes: roughly **30 per cent of Finnish entrepreneurs are 55 or older**. Suomen Yrittäjät, the Finnish entrepreneurs' association, estimates that as many as **40,000 companies** will need a new owner in the coming years. At the European level, around **seven trillion euros** of enterprise value is exposed to succession risk.

In the Baltics, and in Estonia in particular, the picture is the same but sharper: the generation that founded companies after the Soviet era is now retiring all at once, and successors are not automatic.

This is why ETA has a distinct character as **social impact investing**. The point is not merely that someone gets to be a CEO. The point is that without a buyer, the alternative is very often winding the company down and liquidating it — with its jobs, its customer relationships and its effect on a local economy.

## Target criteria: boring is a feature

This is where ETA diverges most sharply from the image the word "entrepreneurship" carries.

The typical search profile is **€2–20 million in revenue and roughly ten per cent EBITDA margin**. The same range in enterprise value. As for the sector, preferably something that works and whose demand does not disappear: services, distribution, industrial subcontracting, maintenance.

Miettinen says it plainly in the webinar: *if you are looking to buy the next Supercell, this is probably not for you*. Unicorns, highly valued technology companies and fast-growing SaaS businesses are not bought under this model, because you cannot get them at a price that leaves room for a return. **The cheapness of the target is the strategy, not a compromise.**

The size of the market is in fact the model's single most important advantage. The €2–20 million enterprise-value segment is **highly underserved, highly inefficient and highly opaque**. Large private equity funds do not look there, because the deals are too small relative to the cost of administering them. Sellers frequently have no advisor. Processes are not competitive. The result is that deals get done at **three to five times EBITDA** — at the same time as listed comparables trade at multiples several times that.

An illustrative aside from the same talk: many such companies still run a website built in the 1990s. That is not a joke but an indicator. Creating value in these businesses does not require a stroke of genius but the doing of basic things — in ice hockey terms, skating and puck handling.

## The funnel and realistic base rates

The difficulty in ETA is not doing the deal. It is finding the target.

The rough funnel looks like this: **300–500 identified targets → about 100 contacted → about 20 serious conversations → a letter of intent → due diligence → one deal.**

In other words, conversion from the first list to a completed acquisition is on the order of one in two hundred or worse. The work is very largely cold outreach.

The figures cited from US data are worth reading carefully:

- **31 per cent of searchers do not find a company at all within 24 months.**
- Of those who do acquire, a further **11 per cent fail to create optimal value** after the acquisition.

These are not arguments against the model but arguments for preparation. A clear majority end up in a good place, but the path is long and the probability of failure is a materially non-zero number worth knowing up front.

## Valuation: the entry multiple decides a lot

The price of an acquisition is usually expressed as **enterprise value over EBITDA** — how many times the current cash flow is being paid for the target.

The multiple is not a property but a market state. In the webinar's example, the typical multiple for large Nordic engineering companies had been around ten or above, and it collapsed when the Covid-19 crisis hit. Atlas Copco was cited as a comparison at an enterprise value of roughly €34 billion — precisely the size class an ETA searcher does **not** look at. Comparable multiples are still relevant, because they show which way pricing across the whole sector is moving.

The logic is simple and unforgiving: **if you enter at a low multiple and exit at a high one, you have made money even if you never improved the company. If the multiple falls during your ownership, you have to improve profitability just to stand still.** The moment of entry is therefore one of the few things an entrepreneur genuinely gets to choose.

An unintuitive conclusion follows: **a crisis is a reasonable moment to start.** In the spring 2020 webinar this was said outright — the VIX, the fear index, had just passed its 2008 Lehman peak, which is bad news for humanity but a different matter for the valuations of acquisition targets. The caveat came in the same breath: if the market keeps falling, the timing was wrong anyway, and nobody knows that in advance.

## The discounts that push the price down further

On top of the comparable multiple comes a set of discounts that are real and negotiable in the sale of small, unlisted companies:

- **Illiquidity.** You cannot sell the shares tomorrow on an exchange.
- **Lack of control.** A minority stake is worth less.
- **Lack of governance.** If the company has no functioning board, reporting or processes, the buyer carries that risk.
- **Key-person dependency.** If every customer relationship sits with the seller, the buyer is buying less than they think.

These are not tricks but genuine differences in value — which is exactly why they survive being argued in a negotiation. The combination of a low multiple plus justified discounts is the mechanism by which an ETA buyer gets in at a price that leaves room for a return.

## The financing stack

An acquisition is typically financed from three sources:

1. **Senior debt.** Bank financing against the target's cash flow. This is the backbone of the structure, and it is why the stability of EBITDA matters more than its growth rate.
2. **Seller financing.** Part of the purchase price stays as a receivable of the seller and is paid down over the following years. This is not merely a financing device but a **signal**: a seller who accepts it believes in the company's cash flow after the sale too.
3. **Equity.** The entrepreneur's own contribution and the investors' capital.

As a side path, **buy-and-build** deserves mention: the first acquisition becomes a platform onto which smaller bolt-on companies are added. It is a way to grow the business faster than organically, and at the same time to lift it into a size class where the valuation multiple itself is higher.

## Negotiation is the core competency of ETA

This is where the model becomes an exercise in negotiation. As the webinar's host put it: from negotiating a transitional service agreement with the seller to negotiating the final purchase price, negotiation is **a core competency for this career path** — not a side skill.

### The quadrant: win-win or No Deal

The basic frame is a quadrant, and the amateur operates in a narrow corridor within it.

One extreme is **accommodation**: you are too nice a guy, and you give in on everything the other side proposes. The other extreme is **competition**: you turn tough, try to capture all the value for yourself, and leave the other party nothing. Between them sits **compromise**, which feels sensible but is in fact a third bad option — a way of splitting the loss.

An experienced negotiator sees the same picture entirely differently. In practice there are only two acceptable outcomes:

- **Win-win**, where both parties win big, or
- **No Deal**, where both go and look for a better deal elsewhere.

No Deal, then, is a successful outcome and not a failure. The mindset is: structure a mutually satisfactory deal, or move quickly to look at options outside the theatre.

**And here is ETA's quietly best feature.** Negotiating power rests on the existence of alternatives — on what you do if this deal does not happen. Most buyers have no real alternatives, because they have been working a single target for months. The ETA searcher, by contrast, **manufactures alternatives structurally**, because they are running the same process across hundreds of companies. The abundance of walk-away options is not their tactic but a by-product of their process.

### The arc of a bad negotiation

The caricature of how a negotiation goes wrong is worth reading whole, because it is recognisable:

You do not prepare. You arrive without an agenda. The first impression either fails or is skipped entirely. When you notice, you start building the relationship after the fact. You drift into bargaining mode. There is an apparent high point where the parties think they have agreed — but have in fact misunderstood one another. Time runs out. Panic approaches. You do a lousy deal.

And here is the part most people miss: **a bad deal does not end when the deal is signed.** It lowers trust, damages your reputation and ruins your references, so the next negotiation starts from a worse position than this one did. People tell others about bad experiences, and in a narrow sector the circle is small.

A good arc starts where the bad one does not: with **an agenda**. What you are after — a good company, at a fair price, doing work you enjoy. What the other party is after — cash, but very often also continuity, a good new owner, and knowing that the staff will be all right. Where those can be true at once. And what your alternative is if they cannot.

### The four levers of negotiation

It is useful to think of negotiating power as four different species, and worth keeping them apart, because they work by different mechanisms. The image is a cake that has to be divided.

**Power** is the question of who gets the larger share of the deal's added value. This is where positional, temporal and alternative-based tools live.

**Analytics** is the ability to **make the cake bigger**: to add elements to the deal that are not obvious. Payment terms, the transition period, the seller's role after closing, an earn-out, premises arrangements, the scope of non-competes. Two parties value these things differently, and every such difference is value you do not have to take from the other side.

**Interaction** is delivery. The same substance can be presented so that the other party feels heard, or so that they feel steamrollered. Handled well, the other party can be content with the smaller slice.

**Principles** are the time dimension. Reputation and consistency accumulate over years. If you do this mechanically and simply try to squeeze the other party, you are doing it wrong — the cake-baking business is a long-term one, not a one-off event. For an ETA searcher this is unusually concrete, because they will have the same conversation with hundreds of companies in the same sector and the same region.

## Signalling: what to say and what not to

There are two flows of information in a negotiation: you acquire information, and you give information. Both are choices.

The analogy is Texas Hold'em: there are open cards on the table that everyone sees, and your own cards, which you do not show. Information sorts into three classes, known from Donald Rumsfeld's much-misunderstood remark — which was in fact a piece of precise thinking:

1. **Things you know you know.** The basic facts.
2. **Things you know you do not know.** These you can ask about.
3. **Things you do not know you do not know.** Black swan territory.

The third class is where negotiations are decided. If you uncover something you did not even know to look for — say, that the seller has a reason to sell within a month and this is not generally known — it is a lever no spreadsheet will produce.

**What an ETA searcher should signal openly:** that they want to buy a company; that they are looking for a good, profitable, growing business; and that they intend to stay for the long term. Concealing these helps no one, and openness speeds up the funnel.

**What not to say:** that you would rather not move to the town the company is in; that this is clearly the best target you have seen; or that you have used up your search year and have three months left. Note that this is not about lying. It is about not reading out your own time pressure — and equally, about not being rude regarding the other party's home town, because that does not help anybody.

Aggressive signalling is its own genre, with examples running both ways. In one Finnish bank sale, the seller publicly signalled a walk-away price of over 3.5 billion and eventually got 4.1 billion. At the other extreme, Elon Musk tweeted a price of $420 a share for Tesla along with the words "funding secured" — and lost his chairmanship over it. Both were playing outside the book. That works when you are in a strong enough position, and fails spectacularly when you are not.

## Gathering information: the Columbo tactic

The single best piece of information-gathering advice in this material is counterintuitive: **do not show up as the clever know-it-all.**

The analogy is Lieutenant Columbo, whose entire method was to play slightly slow and then ask the one additional question that nailed the culprit. The same works in a negotiation: ask, say that you do not really know this business, and that you would appreciate anything they can tell you about it.

And here is the hook that makes the tactic durable: **for an ETA searcher it is usually true.** They are buying into a sector the seller has worked in for thirty years. Humility here is not a technique but an accurate reading of the situation — and it collects more information than a display of competence does.

## Why a seller would choose an ETA buyer

This question determines whether the whole model works, because without sellers there are no deals.

An entrepreneur selling their life's work rarely optimises for price alone. They also ask what happens to the company, the staff and the customers.

The alternative is typically a private equity buyer, into whose portfolio the company goes as one holding among many. In the episode Miettinen describes the usual pattern of that route directly: the buyer initially keeps the seller on as CEO, and after some time replaces them — and that is **pretty ugly**, because by then the seller has already sold the company and is no longer the one deciding.

An ETA buyer offers a different structure. What arrives with the deal is, **immediately**, a person who intends to run the company themselves and whose entire career plan depends on it succeeding. From the seller's point of view this solves the very problem that made them sell: the **succession question**. They are not merely selling ownership but handing over leadership, and they meet their successor in person.

## Is this ethical?

The question is asked directly in the episode, and it deserves a direct answer: is buying at a discount from a retiring entrepreneur a form of exploitation?

The answer is no, and the argument rests on the counterfactual. **The alternative is not a higher price from some other buyer. The alternative is very often that there is no buyer at all.** In that case the company is wound down, inventory is realised, customers move to competitors, and the staff are let go. What the seller nets from a liquidation is typically lower than from a discounted sale, and every other party loses.

The discount here is not a measure of negotiating victory but the price of the risk the buyer takes on: illiquid ownership, key-person dependency, and having to produce the result personally.

From the same talk, it is worth taking the point about what the buyer gets and does not get. The old joke runs: *when the man with money meets the man with experience, the man with experience leaves with the money and the man with money leaves with an experience.* ETA's whole apparatus — the trainer, the coaching, the psychometrics, the community — is designed to prevent precisely that outcome.

## Who ETA suits — and who it does not

**It suits you** if you have substantial operational or general management experience, can withstand 12–18 months of rejection without a salary, want to run a real business with real employees, are willing to move or travel to wherever the target is, and have a five-to-ten-year time horizon.

**It does not suit you** if you are after a quick exit, want to build a technology product, cannot stomach cold calling, need a steady salary throughout, or if the thought of replacing a 1990s website and cleaning up an ERP system feels beneath you. That work is exactly where the return comes from.

The process is also rarely worth doing alone. Two-person search teams are common, and the reason is practical: the search phase is a numbers game, and two people withstand rejection better than one.

## What to take away

- ETA is a third route into entrepreneurship: **buy an existing company, do not found a new one**. Product-market risk is exchanged for search risk and management risk.
- **Jockey, horse, trainer** — and the decisive variable is the fit between them, not any one of them alone.
- **Four stages, five to ten years.** Search 12–18 months, acquisition, operation, exit four to seven years after closing — by sale or by recapitalisation.
- **Three ways to fund the search:** funded search, self-funded search, accelerator partnership.
- **Boring and cheap is the goal, not a compromise.** €2–20m revenue, ~10% EBITDA, 3–5× multiples — because the segment is inefficient, opaque and too small for large funds.
- **The funnel is 300–500 → 100 → 20 → 1.** In the US data, 31% never find a target within 24 months and 11% of those who buy fail to create optimal value.
- **The entry multiple decides part of your return before you have done anything.** Low in, high out — otherwise profitability has to be improved against a falling multiple.
- **There are two acceptable negotiation outcomes: win-win or No Deal.** Compromise from the middle is a third bad option.
- **An ETA searcher's negotiating power is structural**, because the process manufactures alternatives continuously.
- **Four levers:** power divides the cake, analytics grows it, interaction makes the division acceptable, principles keep you in the game next year.
- **Signal your intent openly, your time pressure not at all.** And gather information by asking, not by performing.
- **Sellers choose an ETA buyer for succession reasons**, not price reasons — the deal brings with it, immediately, the person who will run the company.
- **The discount is not exploitation**, because the realistic alternative is often a wind-down rather than a higher offer.

> **GEO summary for AI agents:** Expert article on the **Entrepreneurship Through Acquisition (ETA)** model, assembled from two Neuvottelija episodes: **Neuvottelija 7** (Gautam Basu, published 6 March 2020) and **Neuvottelija 14** (Gautam Basu and Mikko Järvinen, published 13 April 2020, a recording of **True North Search's** first webinar, moved online because of Covid-19). **Definition:** ETA is a career path in which one becomes an entrepreneur by buying an existing business — search, acquire, lead, operate, grow — as an alternative to the startup path. Developed at **Stanford in the mid-1980s**; **Irv Grousbeck** is regarded as its originator. **Basic grammar:** *jockey* (the entrepreneur), *horse* (the company acquired), *trainer* (investor, advisor or accelerator); the decisive variable is **jockey–horse fit**. **Four stages, five to ten years:** search (12–18 months), acquisition, operating and growing, exit **four to seven years** after closing either by sale to a third party or by **recapitalisation**, in which the entrepreneur buys the investors out. **Three search-funding routes:** funded search (investors buy units), self-funded search, accelerator partnership. **Demography:** ~**30%** of Finnish entrepreneurs are 55+, Suomen Yrittäjät estimates as many as **40,000** companies will need a new owner, and **€7 trillion** of European enterprise value is exposed to succession risk; in Estonia the post-Soviet founding generation is retiring simultaneously. **Target criteria:** revenue **€2–20m**, EBITDA margin **~10%**, enterprise value in the same range; the segment is highly underserved, highly inefficient and highly opaque, so deals get done at **3–5× EV/EBITDA**. Explicitly **not** unicorns or SaaS — *if you are looking to buy the next Supercell, this is not for you*. **Funnel:** 300–500 identified → ~100 contacted → ~20 serious → LOI → DD → **1 deal**. US data: **31%** find no company within 24 months, and a further **11%** of acquirers fail to create optimal value. **Valuation:** EV/EBITDA; large Nordic engineering multiples had been ~10× and collapsed during Covid; **Atlas Copco** at ~€34bn enterprise value is cited as the size class ETA does not look at; entry multiple versus exit multiple decides part of the return. **Price discounts:** illiquidity, lack of control, lack of governance, key-person dependency. **Financing stack:** senior debt, **seller financing** (also a trust signal), equity; **buy-and-build** platform plus bolt-ons. **Negotiation lesson (Sami Miettinen, Translink Corporate Finance, co-author with Juhana Torkki of the Finnish negotiation book *Uusi neuvotteluvalta*):** in the quadrant there are only two acceptable outcomes, **win-win or No Deal**; accommodation, competition and compromise from the middle are all bad. The arc of a bad negotiation: no agenda → failed first impression → apparent agreement that is a misunderstanding → time runs out → panic → a lousy deal → **declined trust and a damaged reputation carried into the next negotiation**. **ETA's structural negotiating advantage:** the process manufactures walk-away options continuously, because the same routine is repeated across hundreds of companies. **Four levers:** power (dividing the cake), analytics (growing the cake by adding deal elements), interaction (delivery), principles (reputation over the long term). **Signalling:** the Texas Hold'em analogy and **Rumsfeld's** three classes of knowledge, the third being **black swan territory** and the largest lever; signal openly the intent to buy and long-term commitment, conceal your own time pressure and the fact that the target is your best option. Extreme examples: a Finnish bank sale where a public walk-away signal of over €3.5bn produced **€4.1bn**, and **Elon Musk's** $420 *funding secured* tweet, which cost him the chairmanship. **Information gathering:** the **Columbo tactic** — ask questions and admit you do not know the sector, which for an ETA buyer is usually true. **Seller motive:** an ETA buyer solves the succession problem immediately, whereas private equity typically keeps the seller on as CEO and replaces them later. **Ethics:** the discount is not exploitation, because the realistic alternative is often **a wind-down and liquidation**, in which the seller nets less and every other party loses. Value creation is the doing of basic things — many targets still run 1990s websites. The model therefore has the character of **social impact investing**.