Below are some of the more interesting search fund statistics from our industry.
- Performance and Returns (some of these are crazy!)
- Investor Base (who invests in search fund deals)
- Industry Trends (what sectors are growing)
Search funds continue to grow in popularity among both the entrepreneurial community and among investors in the searcher space.
Searchers love the ability to skip the difficult “startup” stage by acquiring a small business that’s already sustainably profitable. And their investors appreciate the mix of stability and growth opportunities that established small businesses offer.
Because it’s a fairly specialized niche that continues to evolve, finding current information about the search fund model can be challenging. Here are some important search fund statistics that help to explain the state of the industry. These stats can include stats in searchers (both traditional and self-funded), as well as some deals in the independent sponsor space.
Search Fund Statistics: Performance and Returns
Part of the challenge in presenting search fund performance is the variation between different approaches to entrepreneurship through acquisition (ETA). Traditional (or core) search funds and self-funded searches create slightly different models that each have their advantages.
Traditional Search Fund Statistics
The traditional search fund model, which elite business schools pioneered and have supported since their inception, is more thoroughly analyzed. The Stanford Graduate School of Business publishes an annual study that contains data from every known traditional search fund in the U.S. and Canada.
A record 94 traditional search funds launched in 2023. Of these, 63% successfully acquired a company, exceeding the 57% average acquisition rate over the past decade. These new participants bring the total number of traditional search funds in the U.S. and Canada to nearly 700 since 1984.
Image Source: Stanford Graduate School of Business 2024 Search Fund Study
Searchers earn an average salary of $139,000. The average CEO salary post-acquisition rises to $190,000. (where an independent sponsor generally takes a percentage of EBITDA)
The 2024 Stanford Graduate School of Business Search Fund Study found that nearly 7 in 10 acquired companies generated positive returns.
The median purchase price of $14.4 million was down slightly from $16.5 million, which can likely be attributed to the higher interest rate environment. The median EBITDA multiple of these deals was 7.0x. Each acquisition attracted an average of 16 investors.
Traditional search fund partnerships have an average internal rate of return (IRR) of 40%–40.5%. Of all acquired companies, the returns on investment graded out as follows:
- 8% achieved greater than 10x ROI
- 17.5% achieved 5x–10x ROI
- 25% achieved 2x–5x ROI
- 18.5% achieved 1x–2x ROI
- 20.5% resulted in a partial loss
- 10.5% resulted in a total loss
Image Source: Stanford Graduate School of Business 2024 Search Fund Study
Self-Funded Search Statistics
Self-funded solo searches are on the rise as more entrepreneurs recognize the appeal of small business acquisitions. Although we don’t have comprehensive data about every individual searcher pursuing this model, we do know from various studies how it performs on average.
Solo searchers usually target smaller deals—often $1m–$10m enterprise value deals versus $5m–$50m for traditional search funds.
Self-funded searches produce an average IRR of 27%–30.3%. Although traditional search funds average a higher IRR (40%), self-funded searchers have seen many of the largest breakout successes. In the past two years, five out of six searchers achieving a 10x ROI were solo searchers.
Self-funded searchers tend to use more debt in their capital structure, frequently using SBA loans. They also take on more risk, often personally guaranteeing the debt used to acquire the business. This structure affords the solo searcher more equity and personal control over the business than traditional search funds, which award a greater share of equity to capital investors.
This creates opportunities for superior returns on invested capital (ROIC) for self-funded searchers, especially over longer hold periods as the debt is paid off. From year 4 and beyond, a self-funded searcher may earn $80K or more in equity cash flow per year, on top of their salary. The searcher’s annual cash flow can increase substantially once the debt is fully paid off.
For investors, self-funded searches usually offer more favorable deal terms. Investors can often earn 2x ROI or better, even in a 0% growth scenario.
Search Funds Overall Performance
Overall, the search fund model continues to gain in popularity thanks to the strong returns it offers to searchers and investors alike.
Between traditional search funds, self-funded searches, and other alternative search models, search funds have generated an average IRR of 35.1% and an average ROI of 4.5x. The returns on acquired companies that achieved an exit has been even higher at 42.9% IRR.
Investor Base
In the early days of search funds, a small group of one or two dozen experienced investors provided the lion’s share of financial backing for searchers. But this is no longer the case.
The early success among investors in this space has attracted a more diverse crowd of capital providers. The investor base for both traditional search funds and self-funded searches has expanded to include more institutional investors, family offices, and high-net-worth individuals.
Most search fund investors have extensive business and investment experience. Many are based in private equity or investment banking. Others come from backgrounds in business management, operations, or consulting. Many former search fund entrepreneurs become investors themselves, especially after successful exits.
Industry Trends
The search fund landscape continues to evolve as searchers and investors seek out the most promising opportunities. Here are the recent trends in the search fund industry.
Companies Targeted
Searchers target companies with traits that make them attractive acquisition candidates. Businesses with high recurring revenue and a track record of profitability draw the most interest. Searchers look for businesses with sufficient scale, multiple avenues for growth, and low customer and platform concentration. When acquiring a larger business with more employees, searchers look for companies with solid middle management.
The median EBITDA margin of companies acquired by searchers is 27%. The median growth rate among these companies is 25%.
The middle- and lower middle-market companies acquired by traditional search funds average 34 employees. Self-funded searchers targeting smaller companies inherit far fewer employees on average. The vast majority of small businesses in the sweet spot for self-funded acquisitions have fewer than 20 employees, and often fewer than five.
Most searchers take an industry-focused approach, often targeting sectors in which they have some experience or comfort operating. Searchers find most opportunities in growing industries that remain fragmented and contain many companies in their target size range. Industries with healthy profit margins, low cyclicality/seasonality, high barriers to entry, and straightforward operations attract the most searcher attention.
Healthcare and business service companies are the most commonly acquired, each accounting for 25% of all search fund acquisitions since 2014. Software and technology businesses account for another 22%, with tech-enabled services representing 16% of acquisitions.
Other industries frequently targeted include manufacturing, transportation and logistics, distribution, and energy infrastructure.
International Growth
Although search funds originated in the U.S., their popularity has grown internationally. Recent trends in global search fund activity suggest increasing awareness and adoption of the model elsewhere around the world.
A record 111 new search funds launched outside the U.S. and Canada in 2022 and 2023. For the first time, less than half (42%) of international searchers attended MBA programs in the U.S. Several new countries have recorded their first search fund acquisition since 2022, including New Zealand, Paraguay, and Russia.
Attracting Entrepreneurs
The search fund model attracts all types of entrepreneurs and investors. The profile of the average searcher is evolving, broadly becoming more diverse.
In total, 87% of search entrepreneurs are male and 13% are female. But 18% of new searchers last year were women. Around 60% of search fund entrepreneurs are white, and 40% are non-Caucasian ethnicities.
Search funds provide a compelling opportunity for young entrepreneurs, especially those completing business school. The majority of recent searchers were under the age of 35. And 82% of searchers have an MBA degree.
In the past, more than a quarter of all searchers came from a private equity background. The most common backgrounds for searchers are private equity (27%), general management (12%), management consulting (11%), and investment banking (11%).
But the most recent statistics show that participation has broadened, and the predominance of private equity professionals has lessened. Since 2022, investment banking and finance professionals have overtaken private equity as the most common background for search entrepreneurs.
In that time, a slightly larger percentage of searchers have come from management and consulting backgrounds than in the past. And the industry has seen healthy growth in participation among entrepreneurs with backgrounds in the military and business operations.
Conclusions From Search Fund Statistics
The search fund model continues to evolve and grow in popularity. The industry’s trends are enlightening as more searchers and investors discover and adopt search funds as a path to new opportunities. If you’d like to dig in deeper, there is a plethora of podcasts and conferences in the space that I highly recommend.
Today’s search fund statistics are telling a story of expansion. New and diverse entrepreneurs are adopting the search fund model in greater numbers both domestically and abroad. The pool of search fund investors is deepening, providing more opportunities for searchers to secure funding and for new investors to participate in search fund deals.
Updated: December 24, 2024. – Latest statistics for 2025.
