Search fund economics: what the Stanford and IESE data say about returns, risk and who gets paid

How to read search fund statistics

Search fund data comes from voluntary surveys by research centers. Stanford's Grousbeck-Holloway Center has tracked U.S. and Canadian search funds since 1996 and now covers more than 850 core funds. IESE's International Search Fund Center tracks funds outside the U.S. and Canada, 492 as of its 2026 report. Both are valuable and both have limits.

• Aggregate returns pool cash flows from every fund, including funds that never acquired. They describe the asset class, not a typical fund.
• Recent acquisitions are not fully mature. IESE notes that equity appreciation in search fund companies is typically reported to be greatest after years three or four, so recent deals are not fully reflected in returns.
• Survey data depends on who responds. IESE reports it drew on 94 percent of known core funds in its sample, which is high, but the universe of funds is itself defined by what researchers can identify.
• Definitions differ between studies. Do not mix a Stanford figure with an IESE figure in one calculation.

The Stanford 2026 headline numbers

The 2026 study, by Peter Kelly, Stefanos Zenios and Dom Ng, was published July 13, 2026 and updates the 2024 study with data through December 31, 2025. It also introduces data on 67 long duration enterprises. The article summarizing it reports the figures in the table.

The 2024 study (data through 2023) reported an aggregate IRR of 35.1 percent and ROI of 4.5x across 681 funds, as cited in Stanford's own analysis and in secondary summaries. The summaries also give a median price of $14.4 million. Compare the two studies with care, because the fund sets and dates differ.

What PME tells you

Public market equivalent (PME) compares an investment's cash flows with what the same cash flows would have earned in a public market index. A PME above 1 means the investment did better than the index. Stanford reports an aggregate PME of 2.88, and its article says search funds have consistently outperformed the S&P 500. This is useful because IRR alone does not tell an investor whether the return beat a simple alternative.

The skew: why the median is not the average

IESE's 2026 report shows how skewed outcomes are. For all 492 international search funds, the aggregate ROI was 2.8x and IRR 30 percent. Yet the median search fund acquisition was valued at 1.1x investors' capital, while the top-performing fund achieved 23.8x as of the end of 2025. IESE also reports that 23 percent of funds in its study were terminated, up from 14 percent in the 2024 study. A few very large results lift the aggregate far above the middle.

Investors know this. They back many searchers with the expectation that a minority will produce outsized returns. For you as a searcher, the right conclusion is not that the numbers are bad. It is that your own outcome depends on specifics: the company you choose, the price you pay, how you finance it and how well you operate it.

What search capital pays for

The most recent public medians I could verify are IESE's for funds outside the U.S. and Canada launched in 2024 and 2025: 15 investors, about $502,000 of search capital ($450,000 for solo searchers and $649,000 for partnerships), a $100,000 median annual searcher salary, and six months to raise. Salaries made up roughly 45 percent of search capital for solo searchers and 60 percent for partnerships. A third-party summary of the Stanford primer puts U.S. search capital at roughly $400,000 to $500,000 for about two years; confirm the figure in the primer.

The raising guide in this section has an illustrative budget that uses these medians.

How the searcher is paid

A searcher is paid in two ways: a salary during the search, and equity in the acquired company if they close. Summaries of the Stanford primer put searcher equity at up to 25 percent for a solo searcher and up to 30 percent for partnerships, vesting over time and with performance. I could not verify those figures in the primer itself, which is gated, so treat them as a pointer and confirm the current market terms in the primer and with your lawyer.

If no deal closes, the searcher usually has no equity, and investors lose the search capital. The searcher's cost is time, a modest salary relative to alternatives, and opportunity cost. After closing, the CEO is exposed to the company's results, which is the intended alignment.

How the investor is paid

Investors give up search capital for the right to invest in the acquisition. If they exercise it, they supply acquisition equity alongside debt and earn returns when the company is sold or recapitalized, usually after a holding period that IESE describes as typically five to ten years for the searcher and investors. Investors also sit on the board. Their economics depend on how much they put in, what preferences their equity carries and how much of the common equity goes to the searcher. Those terms are negotiated, and the primer is the standard reference.

An illustrative returns bridge

The table shows how value creation drives investor returns in a simple case. It is a teaching example with assumed numbers, not Stanford data, and it ignores fees, preferred returns, the searcher's share and taxes.

Assumptions: a company with $2,000,000 of EBITDA is bought for $12,000,000 (6.0x) plus $500,000 of costs. Debt of $6,000,000 (senior and seller note) and equity of $6,500,000 fund it. After six years, debt has been paid down to $2,000,000. The exit multiple is 6.0x in every case, so the differences come only from EBITDA growth and debt paydown.

Even doubling EBITDA with no change in the multiple produces about 3.4x in this example. Stanford's aggregate 4.75x implies more: larger growth, a higher exit multiple, add-on acquisitions, or the fact that aggregates are lifted by exceptional cases. The way ROI converts to IRR also depends on time. A 4.75x return over 5 years is an IRR of about 36.6 percent, and over 7 years about 24.9 percent, using IRR equal to ROI to the power of one over years, minus one, for a single investment and single payout. Real cash flows are more complex.

What this means for your decision

• Do not count on the aggregate. Plan for the real possibility that you do not find a deal: IESE compares Stanford's 58 percent acquisition rate with concluded U.S. and Canadian funds, so about 42 percent of those did not acquire, and 27 percent of concluded international funds did not.
• Plan for around 20 months from launch to acquisition if you do acquire, and a long hold afterward.
• Value creation after closing is where most of the return comes from. Growth, margin improvement and debt paydown matter more than shaving a point of purchase multiple.
• Choose investors who can support you for years, not just write the first check.
• Build your own model with conservative assumptions. See the financial modeling resources.

Thinking about expected value

A searcher's decision is a bet on a probability tree. The tree below uses illustrative probabilities to show the structure, not data. Replace them with your own beliefs after reading the studies. The Stanford 58 percent acquisition rate is the only probability here backed by a source.

The honest takeaway is that the model offers a path to ownership with real downside risk. Compare it with your alternatives on both dimensions: expected upside and what you lose if it fails.

Questions investors ask about economics

• What is the downside if no company is found, and how will you wind down?
• How do we measure your performance after closing, and what vests when?
• Are you aligned with debt paydown and growth, or only with the sale price?
• What is your plan if the first acquisition underperforms?
• How much will you spend on diligence for deals that do not close?
• How will you keep us informed when results are mixed?

How the data should change your behavior

• Start outreach early: IESE's successful searchers signed a first LOI by month six on average.
• Plan for several LOIs: the average successful searcher in IESE's data signed 4.6.
• Protect against late failures: diligence and valuation disputes are the top reasons LOIs fail.
• Spend time on what the company becomes: IESE notes that equity appreciation in search fund companies is typically greatest after years three or four.
• Build investor trust before you need it: lack of investor support ended 31 percent of IESE's failed LOIs.

Return terms explained

Four measures appear in the studies. Knowing what each one hides helps you read the results.

In Stanford's 2026 summary, the aggregate IRR is 33.9 percent, ROI is 4.75x and PME is 2.88. The three measures agree that the asset class has done well in aggregate, and they say nothing about the typical individual search.

Search capital unit economics

The IESE medians let you see how a typical raise is used. Using the solo searcher median of $450,000 and a $100,000 salary, two years of salary is $200,000, or about 44 percent of capital, matching IESE's 'approximately 45 percent'. The remaining $250,000 covers benefits and payroll costs, legal work, travel, data and the costs of deals that do not close. For partnerships, the median capital is $649,000, with salaries at about 60 percent. Each investor's share of a typical raise is small: dividing $502,000 by 15 investors gives about $33,000 each on average, though actual checks vary. These are arithmetic on medians, not individual outcomes.