“Fundraising is easy” they say.

This is only spoken by people who have never raised money. It’s never easy to raise money. It is hard even for a well-established business. For early stage companies, it is even harder. Combine new business models and unproven concepts with anything involving lawyers, and “easy” is hardly the first thing that comes to mind. Pitch presentations, financial models, talking points, consistency with team members, valuation of a new business in a new market—tell us what part of that is “easy.”

Here are a few options for bringing in outside resources to help you and some of the considerations to examine when you do.

“The fundraising process takes experience.” 

There are generally a few types of third parties you can hire to help you raise money.

  • Finders. Finders are individuals that have an expertise and a network related to raising capital and play the role of opening up their contact list and making introductions to potential investors. Their role is limited to making introductions and facilitating connections. When finders go beyond this limited scope, they must be registered as a broker dealer.
  • Broker/Dealers. A broker-dealer is agent who assists a buyer and/or seller of securities in the fundraising process. This includes all of the following:
    • Negotiating the terms of the financing transaction
    • Offering or providing advice or recommendations in the financing transaction
    • Receiving success-based fees (i.e., fees contingent on the success of the financing transaction)
    • Providing issuing companies with assistance in drafting or distributing sales and financial materials
    • Soliciting investors
    • Handling funds involved in the transaction
    • Previous involvement and the frequency of involvement in the sale of securities
  • Advisors. Advisors are individuals that guide you in the process and may also make introductions. They can be valuable, but like finders cannot provide the types of services or be compensated with a success fee without being a registered broker-dealer.
  • Funding Platforms. These platforms – such as Funders Club and Angel List – connect companies with investors.

There’s several legal issues and compensation concerns to consider prior to engaging in 3rd party assistance for your company’s fundraising efforts. Remember, fundraising can be a full-time job if you let it become one. Take the time to investigate your best options.

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