Search Funds 101: Self-Funded vs. Traditional (and Why It Matters)

If you’ve spent any time exploring Entrepreneurship Through Acquisition (ETA), you’ve probably come across the term “search fund.” But not all search funds are the same—and the difference matters.

At ETA Funding Partners, we focus exclusively on self-funded searchers. In this post, we’ll break down what that means, how it differs from the traditional model, and why we believe self-funded search offers smarter alignment and stronger outcomes for both entrepreneurs and investors.

What Is a Search Fund?

A search fund is a type of investment vehicle used by entrepreneurs who want to buy and operate a small business. The term describes the process of raising money from investors to support the search for a company to acquire—and then raising more money to actually buy it.

From that shared starting point, the paths split: one route is traditional, the other self-funded.

Self-Funded Search: The Entrepreneur-Led Model

In a self-funded search, the entrepreneur uses their own time and money to find, vet, and negotiate a business acquisition. They take on the upfront risk—often for 12 to 24 months—before raising capital.

Once a deal is ready to close, the searcher raises investor money to fulfill the equity requirement, usually alongside debt from a bank (often an SBA 7(a) loan). The investor capital comes in late in the process, once there’s a vetted deal in hand.

Key characteristics of self-funded search:

• No salary during the search – The entrepreneur covers their own costs
• Capital is only raised when a deal is ready
• Deals are often smaller – typically $4M–$6M purchase price, with $750K–$2M in profit
• Financed primarily with debt – up to 90% using SBA loans and/or seller notes
• Entrepreneur keeps more ownership – often 60–90% post-close
• Investors have stronger deal-level protections – such as preferred returns and equity step-ups

Self-funded search is lean, efficient, and highly aligned. It attracts disciplined operators who are all-in on buying the right business—not just collecting a salary while they look.

Traditional Search: The Investor-Backed Path

By contrast, a traditional search fund raises capital before the entrepreneur even begins looking. Investors commit money upfront—often $400K–$800K—to fund the searcher’s salary and expenses during their 1–2 year search. If a deal is found, those same investors typically have the right of first refusal to fund the acquisition as well.

Characteristics of traditional search:

• Investors fund the search and the acquisition
• Larger target deals – typically $10M+ purchase price, with $2M–$5M+ in EBITDA
• More equity required – deals use less debt, so more investor capital is needed
• Searcher keeps less ownership – often 20–25% post-close
• Higher investor risk upfront – because 1 in 4 searches don’t result in an acquisition

Traditional search can work well—but it puts investors in a position of fronting capital with no deal on the table, and puts pressure on the searcher to acquire something even if the fit isn’t perfect.

Why We Focus on Self-Funded Search

At ETA Funding Partners, we’ve designed our fund specifically around the self-funded model—for a reason.

We believe this structure creates better alignment, stronger discipline, and more investor protections:

• Capital efficiency – We invest only when a deal is vetted and ready to close.
• Entrepreneur commitment – Searchers are financially and emotionally invested from day one.
• Stronger deal terms – Investors often receive preferred returns, equity step-ups, and other downside protections.
• Access to great businesses – Smaller, under-the-radar deals are often overlooked by institutional investors—but they’re exactly what self-funded searchers are targeting.

Self-funded searchers also tend to buy businesses at more attractive multiples—typically 2x–6x EBITDA—versus the 6x–8x multiples common in private equity or traditional search. That means there's more margin for error and more potential for upside.

Final Thought: Know Which Model You’re In

If you're a potential searcher, it’s important to understand which path fits your goals, risk tolerance, and resources.

If you're an investor, it’s equally important to know when and how your capital is being put to work.

We believe the self-funded model delivers on what both sides want: strong alignment, clear incentives, and the chance to back great entrepreneurs buying great businesses.

And that’s why we’re all-in on backing self-funded searchers.