There are multiple paths to entrepreneurship. One, of course, is to start your own company. Another? Acquire an existing one.
The Wharton School of the University of Pennsylvania announced plans last week to establish new Entrepreneurship Through Acquisition (ETA) programming supported by a $10 million gift from Ellen L. Hanson and Richard E. Perlman. The program will be housed at the school’s Venture Lab, a hub devoted to entrepreneurship and innovation within the business school for students and alumni.
Hanson and Perlman’s donation will help Venture Lab develop new curricula and workshops, support academic research, bring in experts, and select four Perlman Fellows to receive $50,000 grants to pursue ETA.
How acquisition entrepreneurship works
Acquisition entrepreneurship entails buying, managing and growing existing businesses — an alternative to conjuring a startup from scratch or ascending through the ranks in an investment firm. A subset of private equity, this type of entrepreneurship has been growing in popularity in recent years.
The ETA route demands broad knowledge across industry sectors and strong leadership skills. It has come to be considered an expedient path to owning, growing and managing companies in the business world. It also comes with its own unique benefits and challenges. On the one hand, acquiring a business means infrastructure is already in place; however, the key is finding the right company to acquire.
Entrepreneurs in this space usually establish search funds with investors, or capital to support them as they seek viable businesses to acquire and lead.
Expanding ETA learning at Wharton
More than 200 students across disciplines at Penn already take part in either the Wharton ETA Club or relevant coursework, according to the school.
“Our students in ETA clubs have really been clamoring for more activity, more support and recognition,” Lori Rosenkopf, vice dean of entrepreneurship at Wharton, told Technical.ly.
As part of new ETA programming, Wharton leadership plans to arrange workshops for participants educating on the key skills needed for success in the field.
“When do you self fund versus when are you using a search fund? Do you need committed funding in advance? How do you value what are the valuation methods for determining the value and the potential of small to midsize businesses? How do you do due diligence prior to acquisition?” posed Rosenkopf, listing off topics Wharton workshops could address. “All of those parts are important, so we’ll be elaborating along really all of those lines.”
Selected by a joint committee of Venture Lab staff, faculty and alumni, Perlman Fellows will have the opportunity to explore this form of entrepreneurship without relying on their own funding, which entrepreneurs in this venture generally have had to do.
“I think it’s been a long time coming,” Rosenkopf said. “It’s an area where historically the field of finance and management have not delved deeply in terms of academic research — they focus much more on larger private equity than on entrepreneurship through acquisition.”
Wharton aims to build out a robust program over the next academic year.