Griffins are ETA's Unicorns: Why Search is a Hits Business

Executive Summary

The paper "How are Search Fund Investors Really Faring?" examines whether real-world investors in search funds (an Entrepreneurship Through Acquisition, or ETA, model) are achieving the exceptionally high returns reported in the well-known biennial Stanford Search Fund Study. The authors, Daniel Lazier, Jacob Thomas, and A. J. Wasserstein, analyzed a large dataset of actual investor results and concluded that most investors are not matching the Stanford benchmarks.

The study finds that the Stanford report acts as an "index" of all deals, which is impossible for any single investor to replicate. In reality, investors face challenges with deal access, selection, and capital allocation. The authors' dataset reveals a weighted average MOIC (Multiple of Invested Capital) of 2.5x, significantly lower than the 4.5x MOIC reported in the 2024 Stanford study. The primary reason for this gap is that actual investors fail to gain exposure to all of the rare, high-performing "griffin" deals (those with 10x+ MOIC).

The paper concludes that while ETA is a compelling model, it is "quite difficult". Most investors should expect returns in the 2.0x to 3.0x MOIC range, and success is highly dependent on the rare and difficult-to-capture outlier "griffin" home runs.

Key Findings and Analysis

Methodology

To conduct their analysis, the authors used a dataset from 12 investors representing 23 different funds. This dataset included:

• 1,192 observations where an investor made an "entrepreneur selection" decision (i.e., deciding whether to back a searcher).
• 768 observations where an investor made a "deal allocation" decision (i.e., deciding whether to invest in the company the entrepreneur found). The study focuses on MOIC as the primary performance metric, as IRR data was not universally available.

The Return Distribution and "Griffins"

The study found that search fund returns are highly right-skewed, meaning most outcomes are low, with a long tail of high performers.

• 58% of all completed deals (excluding broken searches) generated a MOIC between 0.0x and 1.99x.
• The authors coined the term "griffins" to describe rare, high-return deals (10.0x MOIC or greater), likening them to "unicorns" in venture capital.
• These "griffin" outcomes are extremely rare in practice, representing only 2% of all deal observations in the sample.

Overall Investor and Entrepreneur Performance

The analysis revealed sobering statistics for both investors and the entrepreneurs they back:

• Investor MOIC: The weighted average MOIC for all investors across all funds was 2.50x. The mean lifetime MOIC for the 12 investors was 2.58x, with a median of 2.39x.
• Broken Searches: Only 64% of the 1,192 entrepreneurs backed by investors successfully acquired a company. The 36% who failed ("broken searches") cost investors $17 million, representing a 2.4% weighted average cost on all deployed capital.
• Entrepreneur Odds: For an aspiring entrepreneur, the data suggests only a 51% chance of generating a return of 1.0x MOIC or higher (when including the 36% chance of a broken search).

The Importance of Outliers ("Griffins")

The study confirms that portfolio success is highly dependent on capturing "griffins".

• The authors found that only 5 out of the 23 funds in the sample had exposure to a griffin.
• Funds with griffin exposure had significantly higher MOICs.
• The authors identify a potential tier of "super investors" who not only capture griffins but also outperform "non-griffin" investors across all MOIC bins, suggesting they have superior access, selection, or allocation skills.

Comparison to the Stanford Study

A central part of the paper is the direct comparison of Yale sample data to the 2024 Stanford population data (excluding broken searches).

The authors argue the difference in MOIC is almost entirely explained by the discrepancy in "griffin" exposure. The Stanford study, as an "index" of the entire population of deals , captures every single 10x+ winner. The Yale sample reflects the reality that it is "extremely difficult for investors to actually participate in all the best outcomes", thus suppressing their actual portfolio MOICs.

Sources

• Lazier, D., Thomas, J., & Wasserstein, A. J. (2025). How are Search Fund Investors Really Faring? Yale Case 2025-10-27.
• Kelly, P., & Heston, S. (2024). 2024 Search Fund Study Selected Observations. Stanford University Graduate School of Business. Case E-870.