Equity tranches

Definition

The gates a searcher passes to earn each slice of their own equity.

Why It Matters

A searcher's stake is granted at the start and almost none of it is owned on day one. Stanford's search fund primer describes the usual split as three equal tranches: one received on acquiring a company, one vesting over about four years of staying employed, and one vesting when performance benchmarks are met, usually a return the investors have to see first. Which gate carries which share is the whole negotiation, because the first two are events a searcher controls and the third is a number a business has to produce. Ask for the split and the hurdle in the same sentence, and ask what happens to the unvested part if the investors sell early.

In numbers: A 25% grant split evenly across three gates leaves a searcher holding about 8% the day they close, with the rest to be earned.