The short answer: In a traditional search fund, investors pay you a salary to search and fund the acquisition, in return you own roughly 20%, 30% of a larger business (median deal ~$14M). In a self-funded search, you cover your own costs and buy a smaller business (often $1M, $10M) with an SBA loan and a seller note, keeping 60%, 100% of the equity but personally guaranteeing the debt. More control and upside per dollar, more personal risk.
Two models, one goal
Both are forms of entrepreneurship through acquisition (ETA), you buy an existing profitable business and run it, instead of starting from scratch. The difference is whose money funds the search and the purchase, and therefore how much you keep.
Traditional search buys you a salary and a bigger business. Self-funded search buys you control and most of the equity.
The traditional search fund
Institutional investors back you in two rounds. First, "search capital" pays you a modest salary (often 18 to 24 months) while you hunt for a deal. Then, when you find one, those same investors fund the acquisition equity, and get the majority of the company. You earn your stake through a vesting structure, typically landing around 20%, 30% at exit. It's the path to buying a larger, more established business, Stanford's data puts the median traditional deal near $14M.
The self-funded search
You go it alone: cover your own living and search costs, then finance the purchase yourself, usually an SBA 7(a) loan for ~90%, a seller note, and your own injection (or one investor for the equity slice). Deals are smaller (commonly $1M, $10M enterprise value, $750K, $2M EBITDA), but you keep most or all of the equity and control every decision. The price of that: no salary during the search, and a personal guarantee on the loan.
Side by side
| Dimension | Self-funded search | Traditional search fund |
|---|---|---|
| Salary during search | None (you fund it) | Yes, investor-paid |
| Typical deal size | $1M, $10M EV | ~$14M median |
| Equity you keep | ~60%, 100% | ~20%, 30% |
| Main funding | SBA loan + seller note | Investor equity |
| Personal guarantee | Yes (SBA) | Usually no |
| Mentorship / board | You build it | Investor board included |
| Downside risk to you | Higher (your money + guarantee) | Lower (investors' capital) |
What the return data says
The two models look different on returns and risk. Traditional search funds post eye-catching aggregate numbers; self-funded search trades some of that ceiling for a much lower chance of losing everything:
| Metric | Self-funded | Traditional |
|---|---|---|
| Median / aggregate IRR | ~25%, 30% (median) | ~35% (aggregate, Stanford) |
| MOIC | Deal-dependent | ~4.5× aggregate |
| Capital-loss rate | ~5% | ~31% negative outcomes |
Traditional aggregate IRR/MOIC are heavily skewed by a few outliers; excluding the top performers, reported IRR falls closer to the low 30s and MOIC to ~3.2×. Self-funded figures reflect investor-reported medians.
It's really about what you want
Neither model is "better." Traditional search suits someone who wants a salary, a board, and a bigger business, and is fine owning a slice. Self-funded suits someone who wants control and the bulk of the equity, can carry their own costs, and is comfortable with an SBA personal guarantee.
Leaning self-funded?
See the financing that makes a self-funded deal work, and the price your numbers support.
Frequently asked questions
In a traditional search fund, investors pay the searcher a salary during the search and fund the acquisition, taking a large share of the equity. In a self-funded search, the searcher covers their own costs and buys a smaller business with an SBA loan and seller note, keeping far more equity but taking more personal risk.
Traditional searchers typically end up owning ~20%, 30% after investors. Self-funded searchers often retain 60%, 100% because they use debt and a seller note rather than institutional equity.
Traditional funds show high aggregate returns (~35% IRR, ~4.5× MOIC per Stanford) but skewed by outliers and with ~31% of deals negative. Self-funded shows a ~25%, 30% median investor IRR with a much lower ~5% capital-loss rate.
Traditional if you want a salary, mentorship, and a larger business, and accept a smaller equity slice. Self-funded if you want to keep most of the equity, move fast on a smaller deal, and can cover your own costs and personally guarantee an SBA loan.
Sources
- Traditional search fund returns and deal size, 2024/2026 Stanford Search Fund Study summaries and ClearlyAcquired analysis (2026).
- Self-funded search returns, ownership, and loss rates, investing.io self-funded search statistics and EBIT Community deal-math analysis (2026).
