Search fund

Definition

Investors fund the search and the deal; the searcher earns equity in return.

Why It Matters

It is the academically documented path, and it buys a searcher two things a self-funded buyer does without: a salary during the search, and investors who can write bigger equity checks for bigger targets. The trade is ownership and control, since those investors take most of the equity and a real say in governance, so the searcher earns their stake back through performance.

In numbers: Backers might fund a $500,000 search for the right to invest in whatever it finds, with the searcher earning around 25% of the equity in three tranches tied to time and performance.