LenderHawk analysis. Not affiliated with or endorsed by Search Funded: The ETA Podcast.
Khaled and Ibrahim Abdel Rahim describe Moonbase Capital’s approach to backing search funds in Spain, France, and Italy, including the qualities they look for in searchers and the kinds of businesses they prefer. They argue that search funds combine the best parts of venture capital and private equity, and they explain why Europe’s family-business culture and current macro conditions make the region attractive for ETA investing.
Aspiring searchers, ETA investors, and MBA students who want to understand how a search-fund-focused European investor evaluates entrepreneurs, businesses, and macro timing.
Moonbase treats search-fund investing as a partnership model, not a passive capital allocation exercise, and expects to add operating support alongside money.
The strongest searchers combine leadership, humility, and enough respect for incumbent managers to win trust in long-held family businesses.
Moonbase prefers businesses that can preserve recurring revenue, high margins, low capex, and diversified customers because those traits make leverage safer.
Inflation and recession push the firm toward businesses that can pass through cost increases and avoid exposure to luxury or discretionary spending.
European family-owned SMEs are attractive because many owners want an exit that preserves legacy, people, and brand rather than a pure financial buyer.
Moonbase believes Europe’s search-fund market is earlier in its growth curve than the U.S., which creates more opportunity before crowding compresses returns.
The firm thinks the standard search-fund model is stable for the next five to ten years, even though more searchers will eventually force adaptation.
Search funds remain more appealing to investors who want mentorship and involvement than to large PE firms that prefer bigger checks and more control.
Search funds combine the entrepreneur-and-support model of venture capital with the asset-backed leverage and cash-flow stability of private equity.
When to use: Use this frame when comparing ETA to VC or PE on risk, return, and investor involvement.
Moonbase invests in search funds across Spain, France, and Italy.
The guests explain the geographic focus of their firm and why Europe is the center of their activity.
The firm says traditional search-fund transactions in Europe usually use leverage in the 55% to 65% range.
They contrast European financing norms with the larger government-backed leverage often available in the U.S.
Moonbase plans to raise a €10 million to €15 million fund.
They describe the size and structure of the vehicle they are currently building.
Moonbase expects a small LP base with a high minimum ticket size.
They want investors who can contribute more than capital and actively support deals and searchers.
They cite Stanford and EISA data suggesting search-fund IRRs have averaged around 30% over 30 years.
This is used to argue that search funds have historically delivered high returns relative to other asset classes.
They reference EISA-style loss rates of roughly 1 in 10 search-fund investments going bad, versus 8 or 9 out of 10 in venture capital.
This comparison supports their claim that search funds offer a more favorable risk-return profile than VC.
They say the first search funds date back to the 1980s and that there were long gaps, including a seven- to eight-year period before the next wave.
They use this history to explain why the asset class took time to gain momentum.
Choose searchers who can lead long-tenured teams with humility, not just candidates with strong finance or consulting credentials.
Why: Incumbent employees and family-business cultures require trust, respect, and leadership more than technical polish.
Favor businesses that can pass through inflation-related cost increases to customers.
Why: That pricing power helps preserve margins when input costs rise.
Avoid businesses where the founder or key expert is the business itself.
Why: Removing an owner-expert can leave the buyer with little operating value.
Build a small, high-engagement LP base if you want to invest in search funds.
Why: The model works better when investors can actively advise, join boards, and support diligence rather than behave like passive PE LPs.
Target businesses with recurring revenue, fragmented customers, and low capital intensity.
Why: These traits reduce downside risk and make debt service more manageable.
Lean into markets with family-business succession pressure and aging owner demographics.
Why: Those conditions increase the pool of motivated sellers and make transition-oriented buyers more acceptable.
Ibrahim says he and Khaled started in their family business, then he went into consulting, later returned to the family business, and only discovered search funds at Stanford. That sequence convinced them to build a firm around what they knew best: SMEs, family businesses, and hands-on support for operators.
Lesson: Deep familiarity with SME ownership and operations can be a stronger foundation for ETA investing than a purely finance-driven background.