The path to Entrepreneurship Through Acquisition (ETA) can take many shapes, and understanding these variations is critical for investors and operators alike. Each fundraising and ownership structure within ETA carries its own implications on control, risk, and economic outcomes, shaping both the acquisition process and the future of the business post-close.

While traditional search funds have long been the foundational model for aspiring operators to raise capital and acquire a business, self-funded searches and independent sponsor deals have gained traction in recent years, offering alternative routes for those seeking flexibility and tailored deal structures. More recently, accelerator-backed search funds have emerged, providing structured support and community while addressing some of the challenges early searchers face.

In this article, we’ll break down the key differences between these four ETA paths, highlighting their unique structures, funding strategies, and potential outcomes so you can evaluate ETA opportunities with confidence.

1. Traditional Search Fund

A Traditional Search Fund is a structured investment vehicle where one or two entrepreneurs raise capital from a group of investors to fund a dedicated search for a company to acquire, operate, and grow. Originating in the 1980s at Stanford and Harvard, this model is designed to give aspiring CEOs a pathway to ownership with mentorship and financial backing.

How it Works: The searchers raise a search capital round (typically €500-600k) from investors to cover salaries (€100-150k per searcher), travel, diligence costs, and deal-related expenses for a search period of 18-24 months. Investors receive the right to invest in the acquisition once a target is found. Upon identifying a target, a larger pool of capital (€1-5m+) is raised from the same investor group to complete the acquisition. The business typically has €500k-5m+ EBITDA, providing enough cash flow to support debt and searcher salaries post-close.

Post-Acquisition Role: Searchers step in as full-time CEOs, assuming operational control, leading day-to-day management, and executing value-creation initiatives while reporting to a supportive board.

Financing Structure:

• Equity: Provided by investors for both search and acquisition

• Debt: 30-50% of total capital structure, balancing risk and return

• Deal multiples: 4-8x EBITDA, reflecting high-quality small cap / lower mid cap companies

Compensation:

• During Search: €100-150k salary, enabling financial stability.

• Post-Closing: €150k+ CEO salary

• Equity Participation: 20-30% of the equity in the business, vested over time and often tied to IRR hurdles for investors

Advantages:
✅ Institutional structure with experienced investor guidance
✅ Financial stability during search
✅ Clear alignment of incentives with investors
✅ Access to high-quality businesses with supportive boards

Considerations:
⚠️ Lower ownership percentage relative to self-funded models
⚠️ Structured processes may slow flexibility in decision-making
⚠️ Need for active investor reporting and governance

Best For: Aspiring operators seeking a structured path to CEO, mentorship, and patient capital while building long-term operating and ownership experience.

2. Self-funded Search

A Self-Funded Search allows entrepreneurs to pursue acquisitions independently, retaining more equity and control while accepting greater financial and operational risk. It has gained popularity as lower barriers to deal sourcing and online networks have democratized ETA.

How it Works: Searchers use personal savings or minimal outside capital to fund their search phase, covering their living expenses, travel, and diligence costs themselves. There is no search salary, meaning the searcher bears all opportunity cost and financial risk until a deal closes. Target companies typically have €500k-2m EBITDA, smaller than traditional search targets, allowing for deals that require less equity and smaller investor groups.

Post-Acquisition Role: Searchers become full-time CEOs, actively managing and growing the business while directly benefiting from the upside created.

Financing Structure:

• Equity: Provided primarily by the searcher and a small network of investors post-LOI

• Debt: Higher leverage, typically 50-90% of the capital stack, often with seller financing

• Deal multiples: 3-5x EBITDA, reflecting small cap / lower-mid cap transactions

Compensation:

• During Search: No salary

• Post-Closing: €150k+ salary once the business can support it

• Equity Participation: 30-100% of the equity, depending on how much outside equity is raised

Advantages:
✅ Highest potential equity upside
✅ Full autonomy and control over deal selection and structure
✅ Flexibility to move quickly without institutional processes

Considerations:
⚠️ No income during the search phase, requiring financial runway
⚠️ Higher personal financial risk with potential to lose personal investment if no acquisition is completed
⚠️ Smaller deal sizes may limit immediate salary and professional resources post-close

Best For:
Entrepreneurs who are comfortable with risk, prefer autonomy, and want to maximize personal ownership while operating smaller but scalable businesses.

3. Accelerator-backed Search

An Accelerator-backed Search combines the structured approach of traditional search funds with additional support, mentorship, and community provided by search-focused accelerators.

How it Works: Searchers join an accelerator program, receiving structured training, mentorship, and a pre-committed investor network to fund their search and acquisition. The accelerator often funds €100-150k per searcher as a search salary, providing financial stability. Accelerator-backed searches typically target companies with €500k-5m+ EBITDA, aligning with traditional search fund target sizes while leveraging the accelerator’s deal sourcing and diligence infrastructure.

Post-Acquisition Role: Searchers step in as full-time CEOs, taking operational control while benefiting from the accelerator’s ongoing support, board participation, and shared resources.

Financing Structure:

• Equity: €1-5m+ for the acquisition provided by the accelerator’s network

• Debt: 30-50% of the capital stack

• Deal multiples: 4-8x EBITDA

Compensation:

• During Search: €100-150k search salary

• Post-Closing: €150k+ CEO salary

• Equity Participation: 10-20% equity, typically with vesting tied to time and performance

Advantages:
✅ Structured mentorship, training, and an instant investor network
✅ Access to experienced advisors, reducing risk for first-time searchers
✅ Faster learning curve with shared resources, frameworks, and peer support

Considerations:
⚠️ Lower equity share compared to traditional or self-funded models
⚠️ Structured reporting requirements and governance processes
⚠️ Less flexibility than fully independent searches

Best For: First-time searchers seeking structured support and mentorship with reduced risk and access to pre-committed capital, accepting lower ownership for increased confidence and resources.

4. Independent Sponsor

The Independent Sponsor model is designed for experienced operators or investors who prefer flexibility, pursuing acquisitions without a committed fund, and raising capital only after a deal is identified.

How it Works: The independent sponsor sources, diligences, and negotiates the acquisition of a target company without pre-raised committed capital. Upon securing a signed LOI, the sponsor approaches equity investors to fund the acquisition, often using their deal thesis and relationships to secure capital. Target companies typically have €2-5m+ EBITDA, and this model is often used for buy-and-build platforms or larger single acquisitions.

Post-Acquisition Role: Sponsors do not typically run the business day-to-day but serve as board members, advisors, or strategic directors while professional management runs operations.

Financing Structure:

• Equity: €2-12m+ raised deal-by-deal after LOI

• Debt: 20-50% of the capital stack, depending on deal specifics

• Deal multiples: 4-8x EBITDA

Compensation:

• During Search: No salary

• Post-Closing: Compensation structured as a management fee (5-10% of EBITDA) instead of a traditional salary

• Equity Participation: 40-60%, depending on the capital structure and negotiation with investors

Advantages:
✅ Flexibility to pursue specific sectors or deal theses
✅ No pressure to deploy capital quickly, allowing for selective acquisition
✅ Potential for large equity stakes and management fee income

Considerations:
⚠️ Requires strong investor network and credibility to secure funding post-LOI
⚠️ No guaranteed income during the search phase
⚠️ Less control over operations unless sponsor steps in operationally

Best For: Experienced operators, former CEOs, or investors seeking flexibility, larger deals, and meaningful equity stakes without daily operational responsibilities.