Start-ups face significant risks in having to create both a product and a market. Entrepreneurship through acquisition (ETA), on the other hand, eliminates much of this uncertainty, says Ivana Naumovska, Associate Professor of Entrepreneurship and Family Enterprise at INSEAD.

In this INSEAD Explains Entrepreneurship video, Naumovska outlines ETA’s compelling proposition for those who want to run a business that already has a foundation in place. When entrepreneurs step into businesses with proven demand, as well as an established business model, cash flow and operations, the challenge shifts from survival to operational excellence, innovation and growth. 

Contrary to the conventional wisdom that high returns can only be born from high risk, search fund investments have both lower risk and higher returns compared to venture capital, according to recent research. The question then is how to get there. 

Naumovska highlights three main ETA approaches and discusses what it takes to succeed as an entrepreneur through acquisition. It requires, she says, a unique blend of leadership, adaptability and a deep passion for operating and improving businesses. She stresses in particular the need for both self-confidence and humility – two traits that are often at odds with each other.