An Honest Conversation: 6 Misleading Myths in the Search Fund Narrative
September 24, 2025
by a professional in Negros Occidental, Philippines
Let’s have a direct conversation about the search fund model. The pitch is compelling, but we believe the common narrative is dangerously out of touch with today's on-the-ground reality. We've seen too many aspiring searchers operating on assumptions that don't hold up.
We've outlined six critical areas where the story veers sharply from the path you'll actually walk.
1. "Searching Isn’t Any Harder Than It Used to Be." This ignores basic economics. A flood of capital from PE funds (up 3x in a decade), family offices (up 3x since 2019), and other investors has intensified competition for the same small pool of quality LMM businesses. It's undeniably harder.
2. "Search Fund Returns Are Universally Awesome." The Stanford study's 35% IRR is pre-tax and gross investor returns. It's a misleading benchmark for your personal outcome. The median searcher gets ~$2.5M, which means half get less, and many walk away with nothing after years of risk.
3. "Your Capital is Expensive, But Manageable." Let's be blunt: it's venture-style return expectations (investors need ~4.5x, the business needs to deliver ~6x+ for you to get paid) on mature, low-growth LMM businesses. It's a massive hurdle.
4. "There Are Hundreds of Thousands of Targets." After you filter for EBITDA size, industry quality, owner willingness to sell, and a realistic price, the ocean of "millions of businesses" shrinks to a pond of a few thousand viable prospects, at best.
5. "Just Find an Untapped Niche." This is easier said than done. If an industry has a conference or is covered by data vendors, you are not the first person to look at it. "Under-followed" is not the same as "empty white space."
6. "Ignore the Brokered Channel – Go Proprietary or Bust." Smart owners hire brokers. It's the biggest financial decision of their lives. Ignoring the entire brokered channel means you're ignoring a huge swath of the most serious sellers.
This isn't meant to be discouraging. It's a call for strategic clarity. The most important thing you can do now is define your personal "unfair advantage" and how it maps to a specific business profile where you can create outsized value.
We've outlined six critical areas where the story veers sharply from the path you'll actually walk.
1. "Searching Isn’t Any Harder Than It Used to Be." This ignores basic economics. A flood of capital from PE funds (up 3x in a decade), family offices (up 3x since 2019), and other investors has intensified competition for the same small pool of quality LMM businesses. It's undeniably harder.
2. "Search Fund Returns Are Universally Awesome." The Stanford study's 35% IRR is pre-tax and gross investor returns. It's a misleading benchmark for your personal outcome. The median searcher gets ~$2.5M, which means half get less, and many walk away with nothing after years of risk.
3. "Your Capital is Expensive, But Manageable." Let's be blunt: it's venture-style return expectations (investors need ~4.5x, the business needs to deliver ~6x+ for you to get paid) on mature, low-growth LMM businesses. It's a massive hurdle.
4. "There Are Hundreds of Thousands of Targets." After you filter for EBITDA size, industry quality, owner willingness to sell, and a realistic price, the ocean of "millions of businesses" shrinks to a pond of a few thousand viable prospects, at best.
5. "Just Find an Untapped Niche." This is easier said than done. If an industry has a conference or is covered by data vendors, you are not the first person to look at it. "Under-followed" is not the same as "empty white space."
6. "Ignore the Brokered Channel – Go Proprietary or Bust." Smart owners hire brokers. It's the biggest financial decision of their lives. Ignoring the entire brokered channel means you're ignoring a huge swath of the most serious sellers.
This isn't meant to be discouraging. It's a call for strategic clarity. The most important thing you can do now is define your personal "unfair advantage" and how it maps to a specific business profile where you can create outsized value.
in Singapore
from Columbia University in New York, NY, USA