Entrepreneurship through Acquisition (ETA).

By Stew Glynn, Managing Partner & Co-Founder, TEN13

Executive summary

TEN13 is a Brisbane-based Australian venture capital syndicate founded in 2019 by Stew Glynn and Steve Baxter. Since inception, TEN13 has invested more than A$125 million behind top-tier founders, backing 54 technology companies from idea to execution at scale through our Venture Capital division. Our strategy has been built on top of Australia's largest network of technology investors - a collective of entrepreneurs, operators, and executives who bring both capital and capability.

We now see an equally compelling opportunity to support an adjacent category: Entrepreneurship through Acquisition (ETA).

ETA is an established investment model where investors back talented entrepreneurs to acquire and grow established, profitable small-to-medium enterprises (SMEs). Instead of starting from scratch, acquisition entrepreneurs buy businesses with stable cashflows and succession needs, then modernise them with new leadership, systems and technology to drive long-term growth.

The U.S. has shown ETA's potential: nearly 40 years of data show average 35%+ IRR and 4.5x ROI (according to Stanford). The model is now spreading globally, with green shoots appearing in Australia as investors and operators begin to recognise the opportunity.

Australia now stands at the cusp of its own ETA wave: Australia has 2.7 million SMEs, and about 22% of business owners are over the age of 60. Almost 600,000 SME owners are approaching retirement, many without a clear succession or exit plan. This generational turnover, combined with a shortage of professional buyers and institutional capital in this segment, is creating one of the most attractive buyer's markets globally.

TEN13 is positioned as an early entrant into ETA in Australia. Our investor network brings not only depth of private capital but deep operational experience, technology and AI capability, and entrepreneurial drive. We can uniquely support acquisition entrepreneurs from sourcing to diligence to modernising and scaling businesses, post-acquisition.

What is Entrepreneurship through Acquisition (ETA)?

Entrepreneurship Through Acquisition is a structured investment approach enabling talented acquisition entrepreneurs to acquire and operate established, profitable SMEs rather than launching new startups from scratch.

The ETA lifecycle

ETA sits between venture capital and private equity. Unlike venture capital, ETA funds businesses that are already profitable with strong cashflow from day one. Unlike traditional private equity, it focuses on smaller deals that institutional funds typically overlook - which tends to mean more attractive purchase prices.

How the capital structure works

Acquisitions are typically funded through a leveraged buyout structure:

• 40-50% senior debt
• 15-25% vendor financing
• 30-45% equity capital, often with preferred return structures

The acquisition entrepreneur usually earns up to 30% equity through performance vesting, aligning incentives between operator and investors.

The global track record

ETA originated in the United States in the 1980s. Since then, more than 680 search funds have been formed, delivering consistently top-tier private-investment returns.

Adoption outside the U.S. is still early. A 2024 IESE study tracking 320 search funds across 40 non-U.S. countries found searchers in less-developed markets were more likely to complete an acquisition than U.S. counterparts - a 79% success rate versus 63% in the U.S. - though returns to date are more modest, at 18% IRR and 2.0x ROI, reflecting the asset class's early stage internationally.

Australian and New Zealand acquisition multiples are structurally the cheapest of any region tracked - a meaningful pricing advantage for early movers.

Why Australia, why now

Australia is approaching a significant generational transition in business ownership - the "Silver Tsunami": the wave of baby boomer business owners reaching retirement age without a clear succession plan.

Refining the target market, the Australian Business Growth Fund's Powering the Growth Economy (2024) report identifies 164,000 private businesses across Australia with revenues between $2m and $100m - the size range most relevant to ETA and private equity acquisition. This segment has grown at a 4.8% CAGR from FY15 to FY22.

Valuations remain compelling. Australian SMEs typically transact at EBITDA multiples below 5.0x - well under the 7.2x seen in the U.S. and Canada and 6.3x seen internationally - creating attractive entry prices for acquirers who can then drive value through better systems, technology adoption and bolt-on acquisitions.

The funding gap is structural. Australia is heavily over-indexed on debt funding relative to growth and venture capital, at a ratio of 247x outstanding debt to growth/venture capital available, versus 5x in the U.S. and 60x in the UK. TEN13 expects a continued gap of $100-200 million in equity funding across Australia over the next two to three years.

Why not private equity?

SMEs targeted by ETA and search funds typically fall below the size threshold that attracts traditional SME-focused private equity funds. The median EBITDA at purchase for U.S. search funds over the past 20 years has been approximately $2 million - well under institutional PE mandates. This lets acquisition entrepreneurs focus on high-quality, overlooked businesses largely without competing against institutional buyers. Private equity is better understood as a likely exit pathway once a business has scaled, rather than a competing entry point.

TEN13's position in ETA

TEN13's right to play in ETA rests on four strengths:

Key risks

Entrepreneurship through Acquisition is a compelling opportunity, but it remains an emerging asset class in Australia. Investors should be aware of the following risks:

General investment risk. SME acquisition investing carries the risk of losing 100% of an original investment. TEN13 recommends a portfolio approach across multiple investments to manage downside risk. Past performance is not indicative of future returns.

Fragmented, opaque market. The Australian SME landscape is highly fragmented, with limited centralised deal flow. TEN13's community and platform provide a sourcing advantage.

Execution risk. ETA outcomes depend heavily on the quality of both the acquisition and the operator. TEN13 aims to mitigate this by backing proven, coachable operators and applying rigorous due diligence.

Track record and emerging-market risk. ETA has decades of success in the U.S., but the Australian market has a limited local exit history.

Market competition and valuation drift. As awareness of ETA grows, competition for quality businesses could increase entry multiples and compress returns.

Operational and integration risk. Post-acquisition value creation depends on effective leadership transition and cultural alignment.

Liquidity and exit risk. ETA investments are illiquid, and realising returns depends on a successful trade sale or PE exit. The underlying businesses generate cashflow from day one, providing some resilience for investors.

Conclusion

Entrepreneurship through Acquisition represents a rare alignment of timing, talent and opportunity in Australia. An ageing owner base, limited succession planning, and an underdeveloped equity market are together creating one of the most attractive conditions globally for this model to take hold.

TEN13 believes the next decade will see the largest transfer of private business ownership in Australia's history - and a corresponding surge in demand for capable new owners and sophisticated capital partners. TEN13 is an Australian venture capital syndicate built to lead this wave.