IN 2007 Lucas Braun and Ryan Robinson emerged from the Stanford Graduate School of Business with such a sense of “professional invincibility” that they decided not to return to their old jobs in a consultancy and a hedge fund, respectively. Instead the two Americans took a leap of faith—in themselves.

They were 32 and had no experience of running businesses, but they persuaded a group of investors to finance them for 21 months as they searched for a business to acquire. They discovered OnRamp, a Texas-based private company, and assumed the roles of chief executive and chairman. Following spin-offs and acquisitions, the company now provides cloud computing for industries with sensitive data. Over the past seven years, they say, revenues have grown by 30-35% a year.

The two executives are products of a niche of the private-equity industry known as search funds—such a small niche, in fact, that few in the business have heard of it. But Stanford, which helped pioneer the industry in the 1980s, tracks it, and says that it has grown sharply in the past two years. In 2015 more than 40 new funds were established, twice as many as in 2009. Over the same period the...Continue reading