CASE E-870

JUNE 28, 2024

2024
Search Fund Study
Research Overview
This 2024 study reports on the outcomes of 681 search funds formed in the U.S. and
Canada since 1984. Analysis of the data from surveys of entrepreneurs who formed
search funds and acquired operating companies provides insights into the financial
returns and key characteristics of search funds as of December 31, 2023.

Since 1996 the Center for Entrepreneurial Studies at Stanford Graduate School of 1
1
Business (GSB) has conducted a biennial study of core search funds, an entrepreneurial
path undertaken by one or two individuals who form an investment vehicle with a small
group of investors to search for, acquire, and lead a privately held company for the
medium to long term, typically five to ten years. Through this research, Stanford seeks
to provide insight into the factors that influence the outcomes of these
entrepreneurship vehicles for first-time searcher-CEOs and their investors. This survey
includes data from every known core search fund in the United States and Canada.

Peter Kelly, Lecturer in Management, and Sara Heston, Assistant Director, Search Fund Project, Stanford Graduate School of
Business, conducted this study. This publication is for educational purposes only and may be shared accordingly, but not
stored on external websites or other learning management systems. Otherwise, no part of this publication may be reproduced,
distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical
methods, without the written permission of the Stanford Graduate School of Business. If you are a copyright holder and have
concerns, please contact the Case Writing Office at businesscases@stanford.edu or write to Case Writing Office, Stanford
Graduate School of Business, Knight Management Center, 655 Knight Way, Stanford University, Stanford, CA 94305-5015.

1
This study focuses on search funds formed by a first-time searcher (the "entrepreneur" in this paper) and funded by a group of investors,
termed “core search funds” or “search funds.” Other forms of search funds exist, such as those that are self-funded, funded by a single entity
(sometimes known as “Entrepreneur in Residence” or "Accelerator” searches) or others, as noted in Appendix C.

PAGE 1
Executive Summary
With a record number of searchers, additional investors, and new classes offered at
business schools, activity in the search fund community continues to grow.

Adding data from the last two years, returns from all search funds since 1984 fell in line
with those reported in recent studies, with a few notable variations. The internal rate of
return (IRR) was 35.1%, compared to 35.3% in the 2022 study, and return on investment
(ROI) was 4.5x in the 2024 study, down from 5.2x in 2022. Notably, the IRR for companies
that have exited increased to 42.9% from 36.8% as several exits in 2022-2023 achieved
significant returns.

Ninety-four core search funds launched in 2023, a record number, while the number of
acquisitions in 2023 decreased by 11 to 29 from a peak in 2021. The median purchase
price of an operating company declined to $14.4 million in this study from $16.5 million
in the prior report, representing a 7.0 multiple of EBITDA for companies with an EBITDA
margin of 27%, growth rate of 25% and 34 employees (all median amounts, Exhibit 5).
Investor capital of $682 million was invested in core search funds and search acquired
companies in 2022 and 2023 combined, down by $94 million from $776 million in the
prior two year period.

The average age of a searcher decreased slightly, with 79% of those launching in 2022
and 2023 aged 35 or younger. More entrepreneurs formed a search fund right out of
business school or without an MBA, and those with an MBA graduated from a wider
range of business schools. More women searched, accounting for 18% of searchers who
launched in 2023. As before, 57% of recent searchers successfully acquired a company.

In the following pages we report on the data, with a focus on how the industry is
evolving. Figures and exhibits contain the most significant data, with commentary and
additional information in the text. For those interested in search funds outside of the US
and Canada, please reference IESE Business School’s sister study.

PAGE 2
What is a Core Search Fund?
A search fund is an entrepreneurial path undertaken by one or two individuals (the
“searchers”) who form an investment vehicle with a small group of aligned investors,
some of whom become mentors, to search for, acquire, and lead a privately held
company for the medium to long term, typically six to ten years. When successful, this
has resulted in a fast path to becoming an owner-operator, attractive financial returns
for both investors and searchers, and growing, well-run enterprises.

The term “search fund” originated at Harvard Business School in 1984, was popularized
at Stanford GSB thereafter, and has since been adopted by business schools and
entrepreneurs around the world. A typical search fund progresses through four stages:

Figure A | The Search Fund Lifecycle

A detailed explanation of the search fund model is included in Appendix A: What is a

Search Fund? Also, Stanford’s Search Fund Primer examines the formation, search,
2

and acquisition stages in detail.

Long Term Hold Model

The term “Long Term Hold” (LTH) is used to denote a category of variations to the core
search fund model that incorporate new ways to acquire and own companies. While a
number of core search funds have evolved into LTHs as they prospered, the use of LTH
here denotes initial intent and structure. A subset of Committed Capital Vehicles (CCV),
LTHs have launched using various approaches, but usually contrast to core search funds
in the following characteristics:

a larger pool of capital committed at launch

focus on a narrow, well-developed, and long term thesis, business model, or industry
a longer intended holding period, often a minimum of 10 to 20 years
slower initial growth than typical in core search, but accelerating over time
much longer term incentive structures
growth primarily via inorganic growth
a board of directors formed at the outset with broad capital call and allocation
powers
the explicit intent to achieve capital efficiency (inorganic growth funded without
additional equity)
the entrepreneur’s role includes a meaningful focus on capital allocation
entrepreneurs suited for a longer hold, with the facility for leading both operations
and capital allocation

Further description of LTHs can be found in the Long Term Hold note on the Stanford
GSB Search Fund Website.
2
Readers can find the Search Fund Primer on Stanford GSB’s Center for Entrepreneurial Studies site: http://www.gsb.stanford.edu/faculty-
research/centers-initiatives/ces/research/search-funds/primer.

PAGE 3
 Past search fund studies included data from seven LTH funds, which are not included
here. More LTH funds have formed recently, and we have so far identified 22 that meet
our LTH criteria (including the aforementioned seven). We exclude data from these 22
LTH in this study, and have begun tracking them separately for future reporting.
Removal of the seven has negligible impact on key study metrics, as all were in early
stages. We look forward to reporting in the future on this interesting variation of the
search model.

Survey Results: Fundraising, Search, and Acquisition

This study includes 681 first-time search funds formed since 1984.3 As in previous
studies, we exclude funds led by principals who had previously raised a search fund,
self-funded their search, or pursued their search with a single search investor. The
exclusion of seven previously included funds now identified as Long Term Hold did not
have a noticeable impact on IRR or ROI, however, did result in minor changes to
historical data in some figures and exhibits.4

After minimal growth in 2021 and 2022, there was a significant increase in the number of
new search funds in 2023. No single factor drove this, however, increased education
about the model and growing amounts of investor capital may have attracted more
entrepreneurs to search.

Acquisitions resulting from searches significantly increased in 2021 before moderating

in 2022 and 2023. The spike in 2021 correlates with a large increase in searchers during
the prior year and may have resulted from a bounce-back in business activity as Covid-
19 restrictions eased. The number of exits in 2022 and 2023 remained level with the
prior two-year period.

Figure B | Search Fund by Activity Year

Funds Raised Acquisitions Exits

100

80

60

40
l

20
l

0 l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l
1984 1987 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2023

3
These include every known search fund and acquired company in the U.S. and Canada. Note that data through 2009 includes international
search funds, tracked thereafter in IESE’s sister studies on International Search Funds.
4
We gathered data on 328 search funds that acquired companies; 296 are included in our aggregate financial analysis, excluding 29 companies
that had been operating for less than one year and three companies for which we had incomplete financial information. Four operating
companies from the 2022 study were reclassified as Long Term Hold and removed for this study.

PAGE 4
The status of all core search funds is reported in Figure C. Of those that concluded their
search, 63% made acquisitions, a decrease from 66% in the 2022 study. However,
around 2014 the acquisition rate decreased noticeably, and despite year to year
fluctuations has remained in the 57% range during the last ten years and recently.

Figure C | All Search Funds by Status

700 7
Deviated

150
600 Searching

500
196
681 Ended Without
400 Total Funds Raised
an Acquisition
40
Exited Negative Return
300 524
Concluded Search Fund
122
200 328
Exited Positive Return
Made an
Acquisition
100
166
Operating
0

Profile of Principals
Recent searchers have tended to be slightly younger, with more searching both right
out of an MBA program or without an MBA (Exhibit 1). Searchers have also come from a
wider range of universities and with more education about search; in 2022 and 2023
48% of new searchers reported enrollment in an ETA class, up from 37% in the 2022
study.

Of note, the percentage of female searchers increased from 11% to 17% for 2022 and
2023. Normalizing for the number of respondents who declined to report ethnicity,
ethnic diversity ticked upward (Exhibit 4).

Fundraising and Search

The amount of capital raised per searcher increased for the first time in four years to a
median of $500k (Exhibit 3), while the median number of investors in each fund
dropped to 12 from 14, and the time to raise remained unchanged at three months
(median).

We collected data on industries targeted by 150 active searchers and 26 searchers that
concluded their search with an acquisition in 2023. The majority of searchers are taking
an industry-focused approach. Those still searching looked at an average of 4.8
industries with a top three of Software, Tech-enabled Services, and Healthcare Services.

PAGE 5
 Those that made recent acquisitions reported looking at an average of 6.3 different
industries with a top three of Healthcare Services, Tech-enabled Services, and Services.
Only 46% of those who made an acquisition in 2023 reported software as an industry of
focus during their search.

The Acquisition
Prospecting
Current searchers and those who recently made acquisitions tend to prefer deep
industry focus to a broader, volume-based approach to searching. They reported
databases and individual research as the primary source for their acquisition. Brokers,
the search community, personal networks, and river guides were also used. These
searchers signed on average 3.6 letters of intent (LOI), the first of which was signed, on
average, 7.8 months into the search. A variety of reasons were reported for unsuccessful
LOIs, including discoveries in due diligence, seller retraction, lack of investor support,
and valuation.

Industries of Acquired Companies

Services and Tech-enabled Services were the most popular industries for acquisition as
can be seen in Figure D. There was a noticeable decrease in software companies
acquired, which may also account for the decrease in the median ratio of Purchase Price
to EBITDA (Exhibit 5). Many factors may have influenced this shift away from software,
including market fundamentals, investor preferences, and more competition from other
types of acquirers.

Figure D| Industries of Acquired Companies 5

2014-2015 2016-2017 2018-2019 2020-2021 2022-2023

20 19
NUMBER OF ACQUISITIONS

15
15
12
11 11 11
10 10 10
10 9
8
7 7
6
5 55 5 5
5 4 4
3 3 3 3
3
2 2 2 2 2 2
1 1 11 1 1 1 1 1 1 1 1 11 1 1

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5
The “Healthcare Other” classification includes devices, pharmaceuticals, insurance, and other healthcare related businesses.

PAGE 6
Acquisition Metrics
The median purchase price decreased to $14.4 million from $16.5 million
(Exhibit 5) for search acquired companies. They also had higher EBITDA margins and
growth rates than in recent studies. The ratio of Purchase Price to EBITDA and Purchase
Price to Revenue both decreased in 2022 and 2023 as well.

These recent changes in acquisition metrics appear to be due to the acquisition of fewer
Software companies, which can have different growth and valuation profiles than
Services businesses. In 2022 and 2023, the portion of searchers making acquisitions
using Enterprise Value to Average Recurring Revenue as a primary metric, dropped to
18% from 31% in 2020 and 2021.

The median number of investors in a core search fund acquisition was 16, 12 of whom
were investors in the original search and four of whom were new at the time of
acquisition, unchanged in the past ten years.

Seller Demographics
Seller demographics remained consistent; predominantly male, white, and with median
age of 55 years, but with more Asian and Hispanic sellers. Post transaction, sellers
increased their length of engagement to six months in this study from four months in the
prior study. Over 90% of searchers report a positive relationship with sellers post-
transaction, and 12% intend to keep the seller engaged indefinitely.

Financial Return Method

Our method of calculating returns is unchanged from the last study (described in
Appendix B). It calculates returns to original search fund investors in both the search
and any acquisition, not including follow-on investments.

Returns
For all search funds, IRR was 35.1% and ROI was 4.5x as of December 31, 2023. Figures E
and F aggregate returns for all searchers, including those that failed to make an
acquisition, acquired and are currently operating a company, or acquired and have
exited (defined as sold more than 50% of equity). This data shows a small decline in ROI
and IRR since the 2022 study.

For exited search funds excluding the top three or five performers, ROI did not change
significantly from the 2022 study while IRR increased (Figures G and H). For detail on the
distribution of returns, see Exhibits 7 and 8.

PAGE 7
Figure E| Aggregate Search Fund ROI (2011–2024)

ROI (Overall) ROI (Excluding Top 3) ROI (Excluding Top 5)

12x

11.1
10x
10.0

8x 8.4

6.9
6x
5.5
5.2
4x 4.5

3.3 3.5 3.4 3.3 3.2

2.9 3.1 3.0 3.1 2.9
2.8 2.7
2x 2.3
2.0

0x
2011 Study 2013 Study 2016 Study 2018 Study 2020 Study 2022 Study 2024 Study

Figure F| Aggregate Search Fund IRR (2011 – 2024)

IRR (Overall) IRR (Excluding Top 3) IRR (Excluding Top 5)

40%

36.7
34.9 35.3 35.1
34.4 33.7 33.7
33.4
32.6 33.0
30% 32.1
28.8 29.4 29.3
28.3 28.5
26.9 26.7
24.5
23.4
20%
20.0

10%

0%
2011 Study 2013 Study 2016 Study 2018 Study 2020 Study 2022 Study 2024 Study

PAGE 8
Figure G| Exited Search Fund ROI (2016 – 2024)

ROI (Exited) ROI (Excluding Top 3) ROI (Excluding Top 5)

20x

16.7
15x

13.0

10x
9.2
7.9
6.9
5x
4.3 4.0 4.0 4.5 4.2 4.4 4.2
3.4 3.4 3.7

0x
2016 Study 2018 Study 2020 Study 2022 Study 2024 Study

Figure H| Exited Search Fund IRR (2016 – 2024)

IRR (Exited) IRR (Excluding Top 3) IRR (Excluding Top 5)

50%

43.5 42.9
40% 41.3 40.8
36.9 36.8
33.9 35.4 34.2
30% 33.3
30.5 30.1 31
29.5
27.3

20%

10%

0%
2016 Study 2018 Study 2020 Study 2022 Study 2024 Study

Search fund success and returns can be seen in Figure I. This chart represents all funds
since 1984. As noted above, since 2014, the acquisition rate has been consistently
around 57%. There has also been an increase in the percentage of acquisitions that
reported a loss in the last ten years. There continue to be significant out-performers as
well, with 11% of companies achieving greater than 10x return, up from 10% in the 2022
study.

PAGE 9
 Figure I| Search Fund Outcomes6
HOLD
PERIOD

1-2x ROI 77% 3.2 years

27% 23% 5.8 years

34% 3.4 years

2-5x ROI
Gain 36%
69% 66% 4.9 years

16% 6.6 years

No 5-10x ROI
Acquisition 25%
37% 84% 5.2 years
Concluded
Search Fund
100% >10x ROI 39% 7.2 years
Acquisition 11%
61% 10.3 years
63%

Loss 64% 3.1 years

Partial Loss
Gain and Operating 31%
66%
36% 6.1 years
Gain and Exited
Loss and Operating 29% 5.7 years
Total Loss
Loss and Exited 34%
71% 4.9 years

We present returns and hold periods by year of acquisition cohorts in Figure J. The
2017–2020 cohort has continued on a positive trajectory, with more than 50% IRR after
44% of the cohort have exited. ROI for this group will likely continue to increase in the
next few years as those still operating continue to grow. The newest acquisitions are off
to a slightly slower start than prior cohorts; those acquired in 2021 and 2022 report an
IRR of 23% and ROI of 1.5x (note that we exclude those acquired in 2023 as they have
been operating for less than one year). Considerable time remains for these companies
to grow in the regular course of a core search fund.

In the 2024 study, we analyzed the relationship between returns and both searcher and
company characteristics. As in past studies, we found no statistically significant
correlations.

For the first time, we have enough data on industries since 2014 to report that
acquisitions in Tech-enabled Services and Healthcare Services currently have higher
IRRs and ROIs than average. Since many of these companies have not yet exited, we
refrain from further reporting but plan deeper analysis in future studies.

6
The gain and loss categories exclude 29 companies operating for less than one year as of December 31, 2023 and three that had incomplete
data. For a select few companies, the exit event is based on original investors selling a majority of their interest.

PAGE 10
 Figure J| IRR and ROI by Year of Company Acquisition (n=295) 7
7.8 YEARS
Average Hold Time
ROI

IRR
7.9 YEARS
11 COMPANIES
7.3 YEARS 22 COMPANIES
8x ROI 80%
13 COMPANIES
6.8 YEARS
37 COMPANIES IRR
7x 70%
5.5 YEARS 5.7 YEARS
4.3 YEARS
6x 10 COMPANIES 49 COMPANIES 60%
80 COMPANIES

5x 50%
2.0 YEARS
4x 73 COMPANIES
40%

3x 30%

2x 20%

1x 10%

0x 0%
UNTIL 1996 1997 - 2000 2001 - 2004 2005 - 2008 2009 - 2012 2013 - 2016 2017 - 2020 2021 - 2022
100% 100% 92% 95% 92% 76% 44% 3%

% Terminal Companies

Figure K| Holding Period of Exited Companies by Year of Exit (n=160)

Average Years Held

YEARS

7.0
7
7.0 YEARS
14 COMPANIES
6.0
6 6.2 YEARS
32 COMPANIES 5.9 YEARS
58 COMPANIES
5.0
5 5.3 YEARS
11 COMPANIES
4.8 YEARS
4.4 YEARS 28 COMPANIES
4.0
4
17 COMPANIES

3.0
3

2.0
2

1.0
1

0.0
UNTIL 2005 2006 - 2009 2010 - 2013 2014 - 2017 2018 - 2021 2022 - 2023

7
The top-performing fund was excluded from this analysis in order to observe underlying trends. In addition, by definition the analysis
presented here includes only data from search funds that completed an acquisition, and not from search funds that terminated without an
acquisition. As such, this analysis is not directly comparable to the overall analysis of search fund returns that includes terminated searches.

PAGE 11
 Partnership Status
Partnered searches accounted for 19% of searches launched in the last two years. While
this is a big shift from 41% in the prior two-year period, the mix has varied greatly by
cohort. For instance, 2018-2019 partnerships made up 20% of the total (Exhibit 3). This
highlights the complex decision of whether to search with a partner, and we note that of
all searches, partner searches have an IRR of 40.5% while solo searches have an IRR of
30.3%. Yet the portion of solo searchers with returns greater than 5x and 10x has
increased in the last decade, and five of the six searchers that achieved a 10x+ ROI in the
last two years were solo searchers. Figure L provides detail on returns by partner status.

Figure L| ROI by Partnership Status 8

(n=296, including 178 solo searches and 118 partnerships)
Partnership Solo
60
59
50
50

40

37
30 33
32

20 24
19 19

10 13
10

0
Total or Partial Loss 1-2x Return 2-5x Return 5-10x Return 10x+ Return

Salary and Equity Compensation for Entrepreneurs

The value of equity earned by entrepreneurs in the 2024 study decreased marginally
from 2022. The average equity earned per entrepreneur still operating was $6.09m with
a median amount of $1.98m per person. For entrepreneurs who had exited their
business the average equity earned was $5.7m per person with a median of $2.25m.

This decrease is likely a function of more entrepreneurs in the early years of operating
and a lower return for current operators in this study. The decrease in the equity
earnings for exited CEOs was impacted by the addition of new historical data regarding
terminal searchers with negative returns for this study.

8
This includes funds both currently operating and exited that made an acquisition at least one year prior to December 31, 2023. Funds that
were still searching, closed with no acquisition or had owned their acquisition for less than one year were excluded.

PAGE 12
 Figure M| Entrepreneur Equity Earned (n=201 Companies)
9

Operating Exited
35%

30% 32%

25%
24%
20%

18% 18%
15%
14%
13% 13%
10% 12%
11% 10%
9% 8% 9%
7%
5%
13 10
0%
$0 $0-2 million $2-4 million $4-6 million $6-8 million $8-10 million $10+ million

Current Compensation
Searcher Compensation
Salary data was collected from 152 searchers that launched in 2022 and 2023. The mean
search salary was $139k, a marked increase from $120k in the 2020 and 2021 cohort,
and is likely a reflection of inflation. Individual compensation was similar for solo and
partnered searchers. The maximum salary reported was $250k by a solo searcher and
the minimum was $60k, reported by a partnership.

CEO Compensation
CEO compensation was collected from 149 study participants and did not change
significantly from the 2022 study. The median salary for a first year CEO was $190k with
a $25k target bonus. Additional detail by year of CEO tenure can be seen in Exhibit 9.
Salary and bonus varied significantly by company size and profitability, particularly in
later years of operation.

Geography
In the 2024 study, we continued to track the relationship between the location of the
entrepreneur during the search and the location of the company they acquired. The
percentage of searchers making an acquisition in the same state in which they searched
continued to decline, accounting for 35% of acquisitions in this study, 36% in the 2022
study, 39% in the 2020 study, and 43% in the 2018 study (Figure O). 10

9
Entrepreneur equity earned was self reported by approximately 60% of companies with a positive return and was manually adjust for those
with a negative return to insure accurate representation.
10
Based on geographic regions as defined in the official Canada and U.S. censuses. In this sense “state” refers to both Canadian provinces and
U.S. states for the sake of simplicity.

PAGE 13
 11
Figure N| Acquired Companies listed by State (n=328)

1
2
3
15
18
1

5 2 2
7
2 18 9
4 7
1 12
1
2 19 4 7 7
5 2 9
11 1 3
55 1
3 13
7 2
1 2
12

29 1

21
2

Figure O| Location of Search Funds vs. the Companies They Acquire (n=331)

SAME STATE SAME REGION OTHER

35%

50%

15%

11
Based on geographic regions as defined in the official Canada and U.S. censuses. In this sense “state” refers to both Canadian provinces and
U.S. states for the sake of simplicity.

PAGE 14
International Search Funds
The Stanford GSB has partnered with IESE Business School in Barcelona, Spain since
2011 to report on search funds outside the United States and Canada. All funds prior to
2010 remain a part of the Stanford study, but all funds outside of the United States and
Canada after 2010 are captured in the IESE companion study.

Search has continued to grow throughout the world, with 111 new funds launched
outside of the U.S. and Canada in 2022-2023, and 51 new acquisitions. There was a
noticeable increase in searchers in several European countries and the Asia & Pacific
region. Searches were launched in six new countries (China, Ireland, Netherlands, New
Zealand, South Africa, and Vietnam) and first acquisitions made in three new countries
(New Zealand, Paraguay, and Russia).

Figure P| International Search Fund Acquisitions, by Region, Country, & Year

1
15 10
3
12 Pre-2014
11
3 2014-2015
7 1
4 2 32
1 2016-2017
23
2018-2019
1 1
3 2020-2021
1
18
1 2022 - 2023
3 8
1
1

Latin America Europe

Mexico 23 Spain 32
Brazil 18
United Kingdom 15
Colombia 4
Germany 10
Chile 3
Italy 7
Dominican Republic 2
France 12
Guatemala 1
Portugal 3
Paraguay 1
Netherlands 1
Peru 1
Poland 3
Asia & Pacific Russian Federation 1
Australia 3
Switzerland 1
Japan 1
Middle East & Africa
New Zealand 1
Israel 1
Ivory Coast 1

PAGE 15
As of December 31, 2023 there were 325 known core search funds outside of the U.S.
and Canada. Of those that had concluded their search, 78%, or 147, had made an
acquisition. Additional information regarding international search funds can be found
in IESE’s report, International Search Funds – 2024: Selected Observations.

Alternative Search Fund Models

As awareness of the search fund model has spread, other approaches have emerged
and increased in popularity. Self-funded, single-investor, accelerator, entrepreneur in
residence (EIR), and Long Term Hold models have all grown along with the core funded
model addressed in this study (self-funded searches are the most numerous). Each
approach has advantages and disadvantages, as does the core-funded approach to
search. The Stanford GSB has not collected sufficient data on companies acquired
through these other models to report on them yet, but the growing cohorts of
entrepreneurs and companies acquired through these interesting alternatives warrant
examination. Further discussion of these models can be found in Appendix C.

Conclusion
Search continues to grow in popularity as an avenue for entrepreneurs to reach the CEO
seat relatively quickly and with significant ownership. Returns for the segment have
remained strong through multiple market cycles and with an influx of new searchers
and capital. Mentorship, collaboration, grit, drive, and a focus 12on the young
entrepreneur have been core principles of the search industry and important factors in
its success. As the community grows with new searchers, new investors, and new
variations on the model, we plan to track its evolution by reporting on key metrics in
future studies.

Acknowledgements
The Center for Entrepreneurial Studies and the authors would like to thank Leyi Shi,
Lead Data Analyst, for her exceptional assistance with this study. Recognition is due to
the pioneering authors of previous versions (study year in parenthesis): Doug Wells
(1996), Josh Hannah (1998), Chris Flanagan (2001), Mu Y. Li (2003), Mike Harkey (2005),
Sean Harrington (2007), Aimee LaFont Leifer and Tjarko Leifer (2009), Arar Han (2011),
Lisa Sweeney (oversight in 2009 and 2011), Jason Luther (2013), Susan Pohlmeyer
(2016), Austin Yoder (2018), and Sara Rosenthal (2011, 2013, 2016, and 2018). This study
would not have been possible without the generous cooperation of the searchers who
responded and the crucial assistance of several experienced investors. Last, we thank
Irv Grousbeck for once again contributing his advice to the study which he began.

12
“The Six Core Principles of the Search Community,” a presentation by Gerald Risk, Sara Rosenthal et al at the 2023 Stanford Search Fund CEO
Conference on September 7, 2023.

PAGE 16
 Exhibit 1 | Characteristics of Search Fund Principals 13 14
Pre- 2002- 2004- 2006- 2008- 2010- 2012- 2014- 2016- 2018- 2020- 2022-
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Age at Start of Search

MINIMUM 26 28 28 27 26 25 24 24 26 25 25 25

MEDIAN 30 31 32 32 30 30 30 32 32 32 32 31

MAXIMUM 35 60 47 50 51 51 46 54 47 55 50 45

UNDER 30 N/A 12% 30% 33% 35% 39% 49% 25% 26% 21% 24% 32%

30-35 N/A 65% 53% 47% 40% 31% 36% 49% 39% 56% 50% 47%

36-40 N/A 12% 10% 10% 16% 14% 11% 20% 32% 17% 22% 17%

OVER-40 N/A 12% 7% 10% 9% 17% 4% 7% 3% 6% 3% 4%

Number of Post-MBA Years Before Search Fund

MINIMUM N/A 0 0 0 0 0 -1 -1 -2 0 0 -1

MEDIAN N/A 2 1 1 4 2 0 1 3 1 1 0

MAXIMUM N/A 10 18 16 20 17 10 26 15 18 13 21

NO MBA N/A N/A 0% 13% 16% 14% 20% 18% 19% 16% 19% 24%

<1 YEAR
N/A N/A 47% 33% 18% 42% 49% 35% 25% 28% 29% 44%
POST-MBA

1-3 YEARS
N/A N/A 17% 27% 20% 17% 20% 24% 19% 34% 26% 19%
POST-MBA

4-7 YEARS
N/A N/A 23% 20% 22% 17% 7% 12% 21% 13% 19% 3%
POST-MBA

>7 YEARS 8%
N/A N/A 13% 7% 24% 11% 4% 10% 16% 9% 8% 8%
POST-MBA

Gender
MALE 96% 100% 100% 100% 100% 94% 100% 95% 92% 93% 87% 79%

FEMALE 4% 0% 0% 0% 0% 6% 0% 5% 8% 7% 11% 17%

DECLINE TO STATE
1% 4%
/ UNKNOWN

Others
% THAT TOOK ETA CLASS 37% 48%

Ethnicity
WHITE 61% 56%

ASIAN 11% 16%

BLACK/AFRICAN AMERICAN 8% 6%

HISPANIC/LATINO 5% 8%

OTHER 4% 6%

DECLINE TO STATE 11% 7%

13
Totals may not sum to 100% due to rounding.
14
Negative numbers in the "minimum" row reflect a small number of searchers who raised searched capital and started searching before
graduating from business school.
PAGE 17
 15 16
Exhibit 2 | Search Fund Principals’ Professional Backgrounds
Professional Pre- 2002- 2004- 2006- 2008- 2010- 2012- 2014- 2016- 2018- 2020- 2022-
Background 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
MANAGEMENT
CONSULTING 26% 23% 10% 26% 7% 14% 16% 11% 7% 12% 15% 16%

INVESTMENT
23% 10% 16% 27% 20% 11% 22% 11% 16% 22% 15% 23%
BANKING/FINANCE

SALES 12% 1% 3% 7% 4% 6% 4% 6% 3% 8% 2% 6%

VENTURE CAPITAL 8% 3% 5% 1% 0% 0% 2% 0% 3% 0% 2% 0%

LINE/GENERAL
5% 27% 7% 15% 11% 19% 2% 12% 14% 17% 16% 14%
MANAGEMENT

MARKETING 5% 2% 4% 0% 4% 0% 0% 0% 1% 2% 1% 1%

LAW 4% 0% 2% 0% 0% 0% 7% 3% 0% 0% 0% 1%

OPERATIONS 4% 7% 16% 1% 7% 8% 7% 5% 23% 3% 7% 4%

ENTREPRENEUR 2% 13% 8% 7% 13% 6% 4% 3% 4% 8% 6% 7%

ACCOUNTING 2% 0% 3% 0% 0% 0% 0% 2% 1% 1% 1% 3%

ENGINEERING 2% 0% 5% 2% 0% 6% 2% 1% 4% 7% 4% 2%

MILITARY 2% 1% 8% 1% 0% 0% 2% 9% 3% 5% 6% 10%

INSURANCE 2% 1% 0% 2% 0% 0% 0% 0% 0% 0% 0% 0%

PRIVATE EQUITY 1% 5% 11% 4% 27% 28% 31% 27% 14% 14% 22% 12%

OTHER 0% 7% 2% 8% 7% 3% 0% 11% 7% 1% 3% 1%

15
Totals may not sum to 100% due to rounding.
16
We refined the professional background categories for the 2018 study, complicating comparisons with categories from previous studies. In
2018, we changed “Operations” to “Operating Management,” and then in 2020 changed it back because of confusion with the term, thus
contributing to the volatility in reported Operations backgrounds.

PAGE 18
Exhibit 3 | Comparison of Search Fund Metrics
Pre- 2002- 2004- 2006- 2008- 2010- 2012- 2014- 2016- 2018- 2020- 2022-
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Number of Principals
SINGLE 68% 41% 42% 75% 36% 62% 59% 72% 55% 80% 59% 81%

PARTNERS 32% 59% 58% 25% 64% 38% 41% 28% 45% 20% 41% 19%

Amount of Initial Capital Raised (Values in Thousands)

MINIMUM $40 $125 $150 $200 $200 $140 $125 $175 $250 $300 $125 $270

MEDIAN $290 $350 $395 $385 $450 $446 $426 $420 $450 $450 $500 $550

MAXIMUM $1,000 N/A $750 $550 $750 $850 $650 $722 $825 $900 $1,200 $1,030

Amount of Initial Capital Raised per Principal (Values in Thousands)

MINIMUM N/A N/A $106 $175 $144 $140 $125 $175 $150 $235 $125 $270
MEDIAN N/A N/A $276 $350 $262 $303 $355 $385 $398 $429 $425 $500

MAXIMUM N/A N/A $750 $540 $450 $575 $560 $640 $600 $570 $700 $1,000

Number of Search Fund Investors

MINIMUM 2 1 3 10 5 8 2 5 2 3 4 5
MEDIAN 12 13 12 14 15 18.5 16 15.5 15 15 14 12
MAXIMUM 25 20 24 23 28 26 30 25 24 27 33 30

Number of Months Fundraising

MINIMUM N/A 1.0 2.0 0.8 0.0 1.5 0.8 0.0 1.0 0.0 0.0 0.0
MEDIAN N/A 4.5 5.0 3.0 4.0 3.8 4.1 3.0 3.0 3.1 3.1 3.0
MAXIMUM N/A 9.0 12.0 10.0 20.0 28.4 8.6 8.0 11.0 12.2 15.2 18.0

Exhibit 4 | Searcher Ethnicity 2022–2023 (n=182)

6%
6%

7% White
Asian

9% Hispanic/Latino
Black/African American
55%
Other
Decline to State
16%

PAGE 19
 Exhibit 5 | Median Statistics for Recent Search Fund Acquisitions

All 2006- 2008- 2010- 2012- 2014- 2016- 2018- 2020- 2022-
Median
Acquisitions 2007 2009 2011 2013 2015 2017 2019 2021 2023
LENGTH OF SEARCH (MONTHS) 19 19 14 18 19 17 23 23 17 20

PURCHASE PRICE $12.8M $9.4M $6.5M $7.9M $11.6M $12.0M $13.1M $10.0M $16.5M $14.4M

COMPANY REVENUES AT
$7.3M $9.1M $5.3M $6.0M $6.2M $7.0M $10.0M $6.3M $6.4M $6.7M
PURCHASE

COMPANY EBITDA AT PURCHASE $1.9M $2.0M $1.3M $1.5M $2.0M $2.5M $2.1M $1.8M $1.7M $2.2M

COMPANY EBITDA MARGIN

22.8% 18.2% 20.5% 23.5% 29.9% 23.4% 22.7% 21.0% 22.0% 26.9%
AT PURCHASE

EBITDA GROWTH RATE AT

11.4% 16.5% 9.3% 11.9% 18.0% 5.0% 20.0% 15.0% 17.0% 25.0%
PURCHASE

PURCHASE PRICE/EBITDA 6.4x 5.2x 4.9x 5.2x 5.6x 5.8x 6.3x 6.0x 7.3x 7.0x

PURCHASE PRICE/EBITDA
(EXCLUDING COMPANIES USING 6.2x 6.9x
REVENUE MULTIPLE)

PURCHASE PRICE/REVENUE 1.8x 0.9x 1.5x 1.3x 1.6x 1.5x 1.1x 1.4x 2.1x 1.9x

COMPANY EMPLOYEES AT
40 60 38 38 21 46 45 32 35 34
PURCHASE

1ST YEAR CEO BASE

$183K $185K $200K $200K
COMPENSATION

Exhibit 6 | Selected Statistics for All Search Fund Acquisitions 17

Total Number of Months From All Acquisitions All Acquisitions

Start of Search to Deal Close: n=324 Purchase Price Statistics
n=268
MINIMUM 0.0 MINIMUM $1.0M

MEDIAN 19.0 MEDIAN $12.8M

MAXIMUM 72.0 MAXIMUM $117.0M

<11 MONTHS 16%
<$4M 7%
11-20 MONTHS 36%
$4M TO $8M 18%
20-30 MONTHS 31%
$8M TO $12M 20%
30+ MONTHS 18%
>$1 M 55%

Additional Statistics for All Search Fund Acquisitions Minimum Median Maximum

COMPANY REVENUES AT PURCHASE $0.5M $7.3M $82.0M

COMPANY EBITDA AT PURCHASE -$1.6M $1.9M $25.0M

COMPANY EBITDA MARGIN AT PURCHASE -23.1% 22.5% 66.7%

EBITDA GROWTH RATE AT PURCHASE -56.0% 11.4% 124.0%

REVENUE GROWTH RATE AT PURCHASE -50.0% 15.0% 100.0%

PURCHASE PRICE/EBITDA MULTIPLE NM 6.3x 114.0x

PURCHASE PRICE/REVENUE MULTIPLE 0.2x 1.8x 22.3x

COMPANY EMPLOYEES AT PURCHASE 4 40 2500

17
Data on some older acquisitions is incomplete, requiring their exclusion from some calculations and resulting in different sample sizes.

PAGE 20
 18
Exhibit 7 | ROI Distribution of Search-Acquired Companies (n=296)

Acquired, Operating Company Acquired, Exited

Total or Partial Loss 48 44

1x-2x Return 43 13

2x-5x Return 25 49

5x-10x Return 9 42

10x+ Return 9 14

0 20 40 60 80 100

19
Exhibit 8 | IRR Distribution of Search-Acquired Companies (n=200)

Acquired, Operating Company Acquired, Exited

100+% 6 8

76-99% 1 6

51-75% 12 19

26-50% 22 52

1-25% 44 30

0 20 40 60 80

18
Of the 328 companies acquired as of December 31, 2023, for which we have data or collected data historically, 29 funds had been operating for
less than one year and we have incomplete data for three. Thus, ROI data was calculated for 296 funds.
19
Of the 296 companies for which we could calculate returns as of December 31, 2023, 200 reported IRR of greater than zero as of December 31,
2023.

PAGE 21
 Exhibit 9 | CEO Compensation (n=149)20

Base Only Bonus Only Total Compensation (Base + Bonus)

Years Since Acquisition Mean Median Mean Median Mean Median

<= 1 YEAR $187K $190K $29K $25K $217K $200K

1 - 2 YEAR $212K $210K $49K $55k $263K $262K

2 - 3 YEAR $217K $215K $44K $50k $261K $265K

3- 4 YEAR $220K $225k $59K $67k $289K $292K

4 - 5 YEAR $209K $205K $40K $29K $249K $226K

> 5 YEAR $256K $229K $75K $45K $336K $260K

Appendix A | What is a Search Fund?

The search fund concept originated in 1984 and has become increasingly well known
among business schools and private investors. A search fund is an entrepreneurial path
undertaken by one or two individuals (the “searchers”) who form an investment vehicle
with a small group of aligned investors, some of whom become mentors, in order for the
entrepreneurs to search for, acquire, and lead a privately held company for the medium
to long term, typically six to ten years. When successful, this has resulted in a relatively
fast path to becoming an owner-CEO, attractive financial returns for both investors and
searchers, and growing, well-run enterprises. As shown in the following chart, the
search fund process consists of up to four stages: fundraising, search and acquisition,
operation, and eventual sale or other event providing shareholder liquidity.

Stages of the Search Fund Lifecycle

The timeframes shown above are estimates for each stage; the time spent on each
phase can vary widely.

20
12 months target bonus reported for CEOs with less than one year tenure

PAGE 22
STAGE ONE: RAISE INITIAL CAPITAL
Search funds are usually structured as limited liability companies, with increasing
interest in C Corps (perhaps in part for the favorable tax treatment afforded when QSBS
requirements are met). In a search fund, the money is raised in two stages: (1) to fund
the search (“search capital”) and (2) to fund the acquisition of a company (“acquisition
capital”). The search capital is used to cover a modest salary and administrative and
deal-related expenses over a two-year period while the entrepreneur searches full-time
for an acquisition. Once a target acquisition is identified and negotiated, the search
fund entrepreneur raises the capital to purchase the company.
To formally begin the fundraising process, the searcher composes an Offering
Memorandum, also called a Private Placement Memorandum (PPM), to provide to
potential investors, presenting the investment opportunity. This document typically
includes several sections:
Executive summary
Overview of the search fund model
Outline of the search methodology to be employed, including resources to be
utilized
Potential industries and/or geographies of interest
Specific criteria to screen acquisition opportunities
Detailed timeline with expected completion dates for specific activities
Detailed budget for the uses of the search capital
Proposal of the form of the investment for the acquisition capital (e.g.,
subordinated debt and/or equity and the associated coupon/preference)
Financial model showing potential investment returns under various scenarios of
an illustrative acquisition
Outline of the potential exit alternatives
Summary of the personal backgrounds of the principal (and allocation of future
responsibilities if more than one principal)

Aspiring search fund entrepreneurs usually engage experienced legal counsel during
fundraising. Qualified legal counsel can help the entrepreneur avoid violating securities
laws; assist in creating and documenting the appropriate legal entities for the fund; and
help the entrepreneur propose legal, tax, and financial structures to potential investors
for the acquisition capital as well as the entrepreneur’s earned equity. Searchers are
well advised to rely on recent searchers or investors for fundraising and PPM guidance.

Principals can tap a wide network of potential investors to raise a search fund, including
experienced individual and institutional search fund investors, as well as business
associates, business owners and executives, and possibly friends and family. Typically,
ten 10 to 15 investors purchase one or several units of the initial capital of the search
fund. These funds will cover the salary, administrative, and deal-related expenses
(office space, travel, legal fees, certain due diligence fees on deals, etc.) of the search
fund for two or more years of searching for a company to acquire and raising acquisition
capital.

PAGE 23
In exchange for the initial search capital, each investor receives (1) the right, but not the
obligation, to invest pro-rata in the equity required to consummate the acquisition and
(2) conversion of the search capital, typically on a stepped-up basis (e.g., 150% of the
actual investment), into the securities issued as the acquisition capital.

Most search fund principals solicit investors who also can serve as high-quality advisors.
Ideal investors can offer expert guidance and advice in deal evaluation, deal execution,
and company management; provide support to the entrepreneur during the ups and
downs of the search process; assist in generating deal flow; and provide leverage with
lawyers, accountants, and bankers. In many cases, investors are drawn not only to the
potential financial returns of a search fund, but also to the psychic benefits of being
involved with a young entrepreneur.

STAGE TWO: SEARCH FOR AND ACQUIRE COMPANY

Compared with raising the initial capital, searching for an acquisition target and
completing the transaction is typically more time-consuming, with a median of 23
months. The general economic environment, industry characteristics, sellers’
willingness to sell, and regulatory issues are among the factors that can prolong or
derail an acquisition process. Depending on the complexity of the deal, it can take three
to 12 months or more from the time the opportunity is uncovered until transactions
close.

Searchers who focus their search, as well as developing and adhering to a systematic
approach of creating deal flow and analyzing deal opportunities, have a higher
likelihood of identifying and closing an acquisition.

In order to mitigate operating and investment risks, searchers generally target

industries that are not subject to rapid technological change, are fairly easy for them to
understand, and are in fragmented geographical or product markets. Within the
preferred industries, companies are targeted based on their sustainable market
position, their history of positive, stable cash flows, and opportunities for improvement
and growth. Searchers and their investors tend to prefer healthy, profitable companies
over turnaround situations. Adhering to a disciplined list of acquisition guidelines
reduces some of the risk of investing in a company run by entrepreneurs who often
possess little operating experience.

PAGE 24
When a target is identified, the searcher must simultaneously undertake several efforts:

Negotiate the company purchase with the seller(s)

Perform due diligence on the company
Arrange for the senior debt and subordinated debt from third parties (if any)
Negotiate the structure of the acquisition capital and secure commitments from the
original search fund investors
Secure additional equity commitments if needed
Finalize the searcher’s earned equity allocation and performance targets with the
investor base

Plan the transition for when the acquisition closes and the entrepreneur assumes
management of the company

In addition to the follow-on equity investment from the original group of investors, the
funds for the acquisition can come from a combination of other sources: seller debt,
seller equity rollover, earnouts, traditional senior and subordinated loans, and equity
financing from new investors. The capital structure, and therefore equity requirement,
can vary widely by industry and the current lending environment.

The acquisition is expected to be at fair market value. Ideally, the acquired company
would provide adequate cash flow and not be highly leveraged, so that the short-term
survival of the company does not rely on immediate, significant improvement in
company performance.

If the initial search capital is exhausted before an acquisition is completed, the searcher
may choose either to close the fund or to solicit additional funding to continue the
search.

STAGE THREE: OPERATION AND VALUE CREATION

Upon completing the acquisition, the searcher will establish a board of directors for the
company, which often includes substantial representation from the investor base. In
the first six to 18 months after the acquisition, searchers typically make few significant
changes to the existing business, opting instead to gain familiarity with its inner
workings and finer details. After becoming comfortable operating the business,
searchers then make changes as they see fit. Searchers can create value through
revenue growth, improvements in operating efficiency, appropriate use of leverage,
organic expansion, add-on acquisitions, or multiple expansions. These means of
creating value are not mutually exclusive; ideally, more than one will apply to a search
fund investment. When a growth plan is executed successfully, the searcher shares in
the increase in equity value through personal earned equity.

PAGE 25
STAGE FOUR: EXIT
Most search funds are established with a long-term outlook, generally greater than a
five-year time horizon and often longer. Even so, investors and principals share a desire
to realize returns at some point; consequently, principals evaluate exit alternatives
throughout the life of the business. Liquidity events for investors and principals can
occur in a number of ways: Companies can be sold or taken public; investor debt may
be repaid; investor equity may be sold to other investors or bought by the company; or
the company can issue dividends.

Appendix B | Financial Return Method

This study calculated financial returns from the perspective of initial search investors.
That is, it measured returns based on investments from and distributions to the original
search fund investors who invested in both the search and acquisition phases of the
deal. As in all of these studies since 2018, this year’s study excluded follow-on financing
22 23
events.21 This study uses two measures of return: ROI and IRR. Both ROI and IRR were
calculated on a cash flow basis, including both equity and investor debt that was
invested as initial search capital and as acquisition capital. These include the losses
from searches that ended without an acquisition, losses in equity upon exit, and losses
in equity value reported while operating the company.

All returns were calculated on a pre-tax basis using data provided by the principals of
the funds or, in the few instances when they were not reachable, by their fund investors.
Returns were calculated using the actual investments into each fund and the
subsequent acquisitions, when they were made, and eventual distributions. In this
study, we conducted an independent audit of calculation methods and checked returns
information collected through our survey against data provided by investors, where
possible.

21
While follow-on financings can be an important part of search fund returns, excluding them in these calculations simplifies data reporting for
searchers, thereby increasing data integrity and accuracy, while staying true to the focus on returns for original search and acquisition
investors.
22
Return on investment (ROI) represents the multiple of initial capital invested that is returned to investors (also known as multiple of invested
capital or MOIC) — i.e., if the group of initial investors invested $5 million and received back $10 million, this would be described as a 2.0x ROI. A
return of $1 million would be a 0.2x ROI and so forth. A complete loss of capital is an ROI of 0.0x.
23
Internal rate of return (IRR) represents the annual compounding rate derived from the actual amounts of search and acquisition capital
invested and returned by an investment. For investments returning only a fraction or none of an investment, IRR is not a meaningful metric.

PAGE 26
Appendix C | Alternative Search Fund Models

Self-Funded Search
Self-funded searchers do not raise search capital from others and instead fund their
own search costs, often living frugally, over similar search periods as traditional
searches (up to three years). They maintain an informal network of mentors and
investors who help them screen possible deals and work to bring this group of investors
together formally at the point of acquiring a company. Self-funded searchers typically
rely on raising more debt to complete an acquisition and often target materially smaller
companies than funded searchers. As a result, self-funded searchers typically wind up
with higher percentage equity ownership (50 to 70%) of a smaller company than funded
searchers. They also often have a smaller set of investor-advisors and a different set of
general management and leadership opportunities. The self-funded model may give
searchers increased flexibility, notably in the location, industry, type, and size of
business they target for acquisition.
Single-Investor, Accelerator, or EIR Model
In the single-investor model, searchers are funded by a single investor, either a firm or
occasionally a person, and receive a salary, advice, support, and access to networks
from that sole investor. This may be a private equity firm, family office, single
professional investor, or “accelerator.” Some, especially accelerators, provide common
services to the searchers, which might include training, database access, shared interns,
mentoring, bank introductions, and prearranged legal and accounting relationships.
Economics for the searcher are generally similar to the funded model.

Long Term Hold Model

Please see the Long Term Hold note on the Stanford GSB website for the most up to
date insights on Long Term Hold.

PAGE 27