The Pernicious Effects of Falling Acquisition Rates in the ETA Ecosystem
Daniel Lazier, Jacob Thomas, A. J. Wasserstein. (2026)
Yale Case, no number printed, July 2, 2026
What is original. The body is a deterministic model of what a falling search acquisition rate does to searchers, fund GPs and LPs. Appendix 1 has the original data: "Three active investors have provided recent SAR data. Although this is a small, non-representative sample, it serves as a directional proxy and should be read as suggestive rather than definitive ... The data set includes 413 unique investments and 348 observable search funds, after eliminating duplicate observations across investors." (p26). "Investor 1 provided all observations through 2017; thereafter, Investors 1, 2, and 3 contributed in balanced proportions." It also re-derives rates from the Stanford study counts for 2005 to 2026. Headline numbers (data). "On a de-duplicated basis, the aggregate SAR ran in the high-50s to mid-60s for the 2019-2021 cohorts (59%, 65%, and 63%) before stepping down to 41% in 2022 and 43% in 2023" (p26). 2024 cohort: "Of the 45 search funds in our study that launched in 2024, 25 have not given up hope ... we predict the terminal SAR of this cohort to be 28.9% ... putting our 95% confidence interval SAR estimate for this cohort at 20% to 40%." (p27). Stanford cumulative rate, as re-computed by the authors: "It climbs from 71% in 2005 to a peak of 78% in 2009, then erodes steadily to 58% by 2026" (p28). Flow rate between Stanford's 2024 and 2026 reports: 54 acquired, 78 quit, 41% (figure, p29); "If readers review the 2026 Stanford study carefully, they will not see the 41% trailing flow rate SAR; we derive that number." (p2). "The true recent trailing rate sits between roughly 41% and 58%." (p30). Headline numbers (model outputs, not observations). "Our calculations indicate that the non-ETA option outperforms the ETA route when the SAR is below about 50%." (p12), on assumed inputs including a $2.25 million terminal equity value taken from Stanford 2024. "LP net MOIC steps down with the SAR, from 2.68x at a 70% SAR (Case A) to 2.53x at 50% (Case B), 2.40x at 40% (Case C), and 2.21x at 30% (Case D)." (p16). Limits. Authors: "The contribution of this note is the implication, not the measurement"; on causes, "these are hypotheses, and we do not have evidence confirming why the SAR is declining."; on the 2024 forecast, "the wide 20% to 40% interval is the more honest summary."; "readers should treat the 50% crossover as a risk-neutral benchmark". Reader's notes: three anonymous investors, geography and search type not stated; pre-2017 data are one investor; self-funded search is neither measured nor modelled; the forecasting model's form is not specified.