Based on the Stanford GSB 2026 Search Fund Study: Selected Observations (Case E-967)
Every two years, Stanford's Graduate School of Business takes the pulse of the search fund world, and the 2026 edition is the most comprehensive yet: 862 search funds tracked since 1984, covering 99% of known funds in the US and Canada. If you're thinking about raising a fund to find, buy, and run a company, this report is essentially the closest thing the industry has to a map.
Here's what the data says, and what it means for you.
The headline numbers remain remarkable. Across all search funds ever raised, investors have earned an aggregate IRR of 33.9% and a 4.75x return on investment as of the end of 2025. Compared against the public markets, search funds as a group have delivered 2.88 times what the same dollars would have earned in the S&P 500 over the same period.
For the entrepreneurs themselves, the outcomes can be life-changing. Among CEOs who exited their companies, more than one in five walked away with $10 million or more in equity. Cash compensation is solid along the way too: new post-acquisition CEOs earned a median of $256,000 in their first year, and CEOs five or more years into their tenure earned a median of $325,000.
The single most important trend for anyone entering the field today is this: acquisition rates have fallen. Historically, 58% of concluded searches ended in a purchase. For funds launched between 2021 and 2024, that figure dropped to 48%, meaning roughly half of recent searchers spent up to two years searching and came away without a company.
Stanford attributes the decline to two forces. The first is the market: more competition for good small businesses and tougher deal conditions. The second is preparation, or the lack of it. As the model has become popular, the range of readiness among searchers has widened. When the researchers controlled for preparedness (using the two MBA programs that have historically produced the most searchers as a benchmark), they found market conditions explain only about half of the decline. The rest, in plain terms, comes down to the searcher.
That's actually encouraging, because preparation is the variable you control.
The study identifies three factors correlated with successfully acquiring a company among recent cohorts:
Experience matters. Searchers with more than two years of post-graduation experience acquired at a 55% rate, versus 40% for those with a year or less. The most successful cohort in history (the 2008-09 searchers, who acquired at an 86% rate) had a median of four years of post-MBA experience, the most of any cohort on record.
Partners outperform solo searchers. Partnered searches acquired at a 58% rate from 2021-24, compared with 43% for solo searchers. Partnered searches also show higher investor returns. Just over a third of new funds now launch with two principals, up sharply from 19% in 2022-23. The market appears to be catching on.
Early momentum is highly predictive. Searchers who signed their first letter of intent within six months went on to acquire 74% of the time; within twelve months, 65%. If your first year passes without a serious deal in motion, the odds turn against you. Successful searchers in 2024-25 signed an average of 2.5 LOIs, with the first coming around month seven. The most common deal-killer was something discovered in due diligence, followed by valuation gaps and lack of investor support.
One more preparation signal worth noting: 61% of the newest cohort took a course on entrepreneurship through acquisition before launching, up from 37% just four years earlier. The bar for showing up informed keeps rising.
The profile of a typical search-acquired company has been fairly stable. Recent acquisitions took a median of 20-21 months of searching to find, and the target company typically had around a 25% EBITDA margin, 30-40 employees, and sold for 6-7x EBITDA. Median purchase prices have climbed to $16 million, near record highs, though the multiple paid actually eased to 6.2x in the latest cohort.
Services remain the most common industry, followed by software, with tech-enabled services and healthcare perennially popular. Education businesses, particularly credentialing and vocational training, hit an all-time high in acquisitions. Geographically, California and Texas led new deals, and most searchers (52%) buy in the same state or region where they search.
The report also flags characteristics linked to better returns once you own the company: high recurring revenue, sensible debt at acquisition (leverage against predictable profits amplifies equity returns), and services businesses generally.
A crucial dose of realism: search fund returns follow a power law. A small number of spectacular outcomes drive the averages. Strip out funds that returned 10x or more, and the aggregate ROI falls from 4.75x to 2.8x; remove the top 10% of funds and it drops to 2.1x.
The same is true for personal outcomes. CEO equity results form a U-shaped distribution that is getting more pronounced: among exited CEOs, 22% earned $10M+, but another 22% earned nothing. Of concluded funds that did acquire, about a quarter ended in a loss of value. The median outcome is good; the distribution is wide. Go in with clear eyes.
For the first time, the study tracks 67 "long duration enterprises" (LDEs), a variant where the entrepreneur raises $10-25M of committed capital upfront around a well-researched thesis, plans to hold for 10+ years, and grows through repeated acquisitions rather than a single purchase and exit.
The early results are striking: of LDEs formed in 2023 or earlier, 96% acquired at least one company, and none closed without a deal. LDE founders skew slightly more experienced, are far more likely to have a cofounder (52% vs 27%), and typically raise a median of $20 million from 17 investors. Returns haven't been calculated yet (most are too young), but if you have deep knowledge of a specific industry and a multi-acquisition thesis, this model deserves a look.
The search fund path is more crowded and more competitive than it was a decade ago, but the fundamentals that predict success are consistent and, importantly, within your control: get real operating or deal experience before you launch, seriously consider a partner, take an ETA course, and build a search process designed to generate credible deal momentum in your first six to twelve months.
The model still produces extraordinary outcomes. It just no longer rewards showing up unprepared.
The full study, including exhibits on searcher demographics, fundraising metrics, acquisition statistics, and returns methodology, is published by the Stanford Graduate School of Business Grousbeck-Holloway Center for Entrepreneurial Studies.
