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 owned almost none of it on day one. The convention splits it three ways: a slice for raising the search itself, a slice for actually closing an acquisition, and the largest slice earned across years of operating, usually against 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.