ÌìÃÀ´«Ã½

A search fund is an investment vehicle that one or more entrepreneurs, known as searchers, raise from a small group of aligned investors to search for, acquire and lead a single privately held company, typically for five to ten years. It lets searchers become equity owning CEOs without first having the capital or experience usually needed to buy or run a company. The model was pioneered by H. Irving Grousbeck at Stanford Graduate School of Business in 1984.

A search fund moves through four stages: raising the fund from investors; searching for a company, usually for one to two years; operating the acquired company, the longest stage; and exiting, when searchers and investors achieve liquidity. Investors fund it in two steps: a small amount of search capital to pay for the search, then a much larger amount of acquisition capital to buy the company the searcher finds.

In 2024 and 2025 the median international search fund raised about $502,000 from 15 investors: $450,000 for solo searchers and $649,000 for partnerships, with a median of six months to close the round. In the United States and Canada the median was $550,000 per searcher from 13 investors. Investors typically buy units of $35,000 to $50,000 and include professional search fund investors, high net worth individuals, former colleagues, business owners, and friends and family.

The searcher negotiates the deal and presents it to the search fund investors, who have the right of first refusal to provide the acquisition capital, often $5 million to $10 million today. The search capital converts into shares of the acquired company at a stepped up value, usually 150% of the amount invested, to reward investors for funding the riskiest stage. Investors normally receive participating preferred equity: they recover their investment plus an agreed annual return before sharing the remaining profits with the searcher.

During the search, searchers draw a modest salary from the search capital, with a median of $100,000 a year internationally. After the acquisition, a solo searcher typically earns up to 25% of the company and a partnership up to 30%, vested in three equal parts: one at closing, one over about four years of service, and one when investors reach performance targets, usually between 20% and 35% net IRR.

By the end of 2025, 676 entrepreneurs had launched an international search fund. New international searchers had a median age of 34 and 60% held an MBA; in the United States and Canada the median age was 32 and 80% held an MBA. The most common backgrounds are management consulting, private equity and investment banking. Above all, investors look for people who want to run and build a business, persevere through rejection, build relationships easily, and seek and follow advice.

Searches that ended in an acquisition in 2024 and 2025 took a median of 20 months internationally. Across all concluded international search funds, 73% acquired a company, compared with 58% in the United States and Canada. Early momentum matters: international searchers who acquired typically signed their first letter of intent by month six, and in the United States and Canada those who signed one within six months acquired at a 74% rate.

Search funds look for a good company in a great industry: a fragmented, growing market, a history of cash generation, high recurring revenue, several avenues for growth and an owner selling for reasons other than a decline in the business. The median international acquisition had a purchase price of $12 million, $8 million in revenue, a 26% EBITDA margin, a price of 5.7 times EBITDA and 50 employees. Searchers usually avoid turnarounds, customer concentration, high customer churn and competitive auctions.

A search fund gives owners a succession path, often when they are ready to retire or step back for personal reasons. Many founders like selling to a younger version of themselves who will run the company personally, and some choose a search fund over private equity or strategic buyers offering a higher price.

As of 31 December 2025, international search funds produced an aggregate return on investment (ROI) of 2.8x and an internal rate of return (IRR) of 30%, up from 2.0x and 18% in the 2024 study. Search funds in the United States and Canada returned 4.75x and 33.9%. Returns follow a power law: the median international acquisition was valued at 1.1x invested capital while the best reached 23.8x, and in the United States and Canada, excluding funds that returned 10x or more cuts the aggregate to 2.8x and 27%.

Investors act as advisers as well as funders. During the search they serve as a sounding board and make introductions to sellers, lenders and advisers; in Europe it is common to form a board already in the search phase. After the acquisition, two or three investors usually join the company’s board to mentor the new CEO and ensure good governance.