Search Fund Terms Worksheet: LP Waterfall Calculator

What the LP Keeps: A Search Fund Terms Worksheet

One exit outcome, three sets of published terms. Change the outcome or the terms and see the LP's share, multiple and IRR under each. Then work through the term-sheet checklist and print both.

Worksheet

What's inside

  • •A waterfall calculator. Traditional search fund, self-funded search and independent sponsor terms side by side, at any gross outcome and hold period. Every output is illustrative.
  • •A term-sheet checklist. The terms that move the LP's share, grouped by where they sit in the documents.
  • •A print view. The print button keeps your numbers and your ticks, or saves them as a PDF. Nothing you enter leaves your browser.

A preview

For example, at a 3x gross outcome over five years, the worksheet's illustrative default terms leave the LP about 2.75x in a traditional search fund, 2.56x with an independent sponsor and 2.20x in a self-funded search. Same business, same exit. The spread comes from the terms. These outputs are illustrative, built from published sources listed under the worksheet, not from any offering.

The worksheet

Set the gross outcome: exit equity divided by all the cash LPs put in, before anyone is paid. The default terms come from published sources. In a traditional search fund, search capital converts into the deal at a step-up and the searcher vests into a quarter of the common in three tranches[1][2]. Self-funded search carries a higher preferred return and a larger searcher share above it[3][4]. The independent sponsor waterfall follows a published worked example: a compounding pref, a full catch-up, then two tiers[5]. Every number the calculator returns is illustrative.

Exit equity divided by all LP cash in, before any split.

Traditional search fund

$274,501

LP net multiple
2.75x
LP IRR
21.4%
Profit to searcher or sponsor
13%

Self-funded search

$219,552

LP net multiple
2.20x
LP IRR
17.0%
Profit to searcher or sponsor
40%

Independent sponsor

$256,250

LP net multiple
2.56x
LP IRR
20.7%
Profit to searcher or sponsor
22%
Change the terms
LP net multiple at each gross outcome, with the terms above
GrossTraditional search fundSelf-funded searchIndependent sponsor
1x1.00x1.00x1.00x
1.5x1.50x1.50x1.47x
2x1.92x1.85x1.80x
3x2.75x2.20x2.56x
5x4.20x2.90x4.06x
10x7.88x4.65x7.81x

What I'd check in the term sheet

0 of 14 checked

Economics
Fees and sponsor money
Rights and exits

Method: a same-outcome waterfall on $5.5M of LP cash, with search capital paid two years before close. It assumes one deal, no dilution and no interim distributions, and every output is illustrative. Outcomes vary widely: of 337 search-acquired companies, 26.4% produced a total or partial loss[9]. Illustrative default terms drawn from[1],[2],[3],[4] and the worked example in[5]. Not investment advice, and not the terms of any offering on SMB Investor Network.

  1. Stanford GSB, 2024 Search Fund Study, Appendix A, Stage One (pp. 23-24; PDF opened)
  2. Goel, Wyma, Wexler, O'Connor, Wasserstein, "Exploring Search Fund Entrepreneur Economics", Yale SOM case (Jul 23, 2023), pp. 1-2, Figure 2 (PDF opened)
  3. Searchfunder community post "Standard investor terms for US self-funded search"
  4. The SMB Investor podcast, Ep 1. Self Funded Search, Jason Ehrlich, 00:30:29
  5. CapitalPad, "Independent Sponsor Economics: Fees, Promote & Waterfall" (Sep 24, 2026)
  6. Citrin Cooperman 2026 Independent Sponsor survey, via CapitalPad statistics and economics pages (Sep 21 and 24, 2026)
  7. McGuireWoods 2024 Independent Sponsor Deal Survey, via CapitalPad (Sep 2026)
  8. Stanford GSB, 2024 Search Fund Study, Financial Return Method and Appendix B (PDF opened)
  9. Stanford GSB 2026 Search Fund Study, via CapitalPad statistics page (updated Sep 14, 2026)

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