Investigating the Role of Informal Investors and Investor Communication in Entrepreneurship-through-Acquisition: A Study in the Context of <i>de novo</i> Entrepreneurship

Abstract Entrepreneurship-through-acquisition (ETA), particularly via search funds (SF), is a growing niche in entrepreneurship and private equity research. Unlike de novo founders, SF entrepreneurs raise capital to acquire and transform existing firms, shifting investor attention toward the individuals’ ability to identify and execute acquisition opportunities. Despite the increasing prominence of the model, little is known about how informal investors evaluate SF entrepreneurs and how these entrepreneurs communicate to investors during fundraising. Drawing on a qualitative multiple-case study of 25 SF entrepreneurs across 15 countries and 12 investors, we examine the role of informal investors and entrepreneur-investor communication in SF fundraising. To contextualize our findings, we incorporate investor perspectives on communication and the roles of informal investors in de novo ventures’ fundraising. Analyzing the data through signaling theory and institutional logics, our findings indicate that in SF contexts, informal investors provide critical testimonial legitimacy, acting as a functional substitute for institutional validation. Moreover, SF entrepreneurs appear to tailor their communication strategies more extensively than de novo founders, using signaling as a pedagogical tool to bridge market knowledge and model familiarity gaps. We advance signaling theory by shifting the focus from what is signaled to who validates the signal in SF contexts, thereby positioning the SF model as a person-centric empirical category within the broader private equity landscape.