Stanford has been associated with Search Funds since the beginning, given the search fund model was shaped by a professor at the Stanford Graduate School of Business in the early 1980s. Stanford regularly now produces a search fund study every couple of years, taking a look at search fund trends, insights, data and outcomes, as well as the overall performance of search funds as an asset class.
The 2024 Stanford Search Fund Study was released recently, covering the period up to 31st December 2023. In this post we’re going to briefly take a look at key themes and insights, as well as highlighting what the study tells us about search funds in the UK and Europe.
If you would like to download the full study, click here: Stanford Search Fund Study 2024
The Search Fund Ecosystem Continues to Grow
Record numbers of entrepreneurs are launching search funds, and growing numbers of investors continue to enter the ecosystem, along with a growing number of business schools extending their education around search funds. This has all led to record numbers of search funds being set up in 2023.
Search Fund Returns
Search fund returns continue to fall in line with numbers shared in other recent studies. The internal rate of return (IRR) was 35.1%, a small decline from the study in 2022. The return on invested capital was 4.5x in 2024, also a decline from 5.2x in 2022. The report noted however that the IRR for companies that have exited increased to 42.9% from 36.8% after some larger exits and significant returns in 2022-2023.
Perhaps as the search fund ecosystem grows and more funds launch alongside more investors entering the space, IRR from search funds as an asset class may continue to decline – not dramatically, but in a way that reflects easier access to capital for a larger number of searchers.
Entrepreneur Returns and Equity
Whilst investor returns drive the search fund ecosystem, entrepreneurs or searchers are keen to know how much equity they may receive from launching and successfully running a search fund.
The study states that for searchers that had exited their businesses, the average equity earned by a searcher was $5.7m per person with a median of $2.25m.
Growth in Europe
The report suggests there was a ‘noticeable increase in searchers in several European countries’, a positive sign of growth in the search fund ecosystem across Europe. Spain sits at the top of the European leader board, followed by the UK, Germany, Italy and France. IESE Business School in Barcelona, Spain has partnered with Stanford to track search funds outside of the US and Canada since 2011.
If you would like to download the full study, click here: Stanford Search Fund Study 2024