Should you use a fundraising advisor to fudraise?

Should you use a professional fundraising advisor to raise your startup round?

Tl;dr: If you are early stage, you should not use a fundraising advisor to represent you in your raise as VCs hate them and don’t want to pay fees. If you are late stage, either hire someone full time or use an advisor. If you find someone amazing, have them as your ‘interim CFO’ but you the CEO still need to lead the round. If you need help, the safest thing to do is hire a consultant by the hour to teach you what to do.

Startup sucks and fundraising is a bitch. That’s the opening line on my blog and you might have nervously laughed atit because deep down you know it is true.

So when it comes to your fundraising time I know you are stressed and wondering if there is someone awesome that can just help you get it done properly and in a short a period of time as possible. Maybe you do some Googling and you hear about professional fundraisers. Or… you are at some startup event and you are approached by someone with a lot of confidence who calls themselves a fundraising advisor. They have all the answers, for just a little fee they say. Hmm. What to do?

There are many terms for them, fundraising advisors, corporate finance advisors, fundraising broker, placement agents. They promise to help you raise money. The singular thing every founder is obsessed with. But should you use them or run for the hills? We’re going to go through this in detail as usual so you can make up your own mind.

Do you need a fundraising advisor?

Let’s start off with the basics.

You need help (Some kind of help)

I say some kind of help because you don’t necessarily need to contract a professional fundraiser. You can coerce contacts or hire a consultant- both of which don’t come with baggage.

  • You don’t have a fricking clue. Full stop
  • You don’t have resources and are scaling

You don’t need help

  • You’ve raised before or read every blog on my site, lol
  • You have a reasonable size team and shizzle is generally working so you can spend 80% of your time raising. I say 80% as it should be 100% but what CEO is actually not going to pay attention, right?
  • You have a Board of advisors or existing investors who can open up their network for you so you are ‘in’ with everyone
  • Maybe you have a CFO that knows more than you and can do a lot of the heavy lifting

How can a fundraising advisor help you?

Yes, theoretically fundraising advisors can help you raise. a16z seems to think they are ok but if you are hot shit you don’t need them. This isn’t what most VCs say though!

Investment banks or other types of advisors can add a lot of value when raising a round of capital, particularly at the later stages. Such advisors can help streamline the process by front-loading a lot of the diligence and preparation, allowing you to focus more closely on running the company. They can also help provide access to a broader set of investors.

That said, not every company needs an advisor, and the decision to use an advisor should be made in the context of the specific situation. For example, companies that receive multiple unsolicited term sheets at compelling valuations have the luxury of choosing their investor without the assistance of an advisor.


They understand the process

Raising money the first time can be like navigating through the Amazon by the stars, only you didn’t take that elective. People who have raised before know the score. They know what VCs mean when they say ‘come back when you have more traction‘ or basically anything else (Read: What investors mean when you pitch them). They know about data rooms, term sheets, the material you need, how to build social proof yada yada.

I think the benefit of this is fairly obvious, right? They basically give you a map.

Manage the process

There is a lot involved in running a process. You need to keep on top of who you have talked to, what stage you are at with them, who has asked for information and if they have received it. What questions are outstanding?

Then there is the whole outreach and raising thing. You are most likely going to pitch 50+ investors so there is a huge amount involved in that! You ‘can’ have an advisor do all this for you.

Look, I can’t hold back. Don’t have an external advisor pitch for you! And never bring them to meetings. I’ll probably be back on this topic later in the blog.

They can write material and help you figure out your strategy more clearly

You need a variety of material. Pitch deck, financial model, information deck etc. You can get help from a fundraising advisor to:

  • Do a financial model that actually makes sense
  • Do a decent pitch deck (doesn’t have to be perfect!)
  • Build your narrative you tell investors
  • Understand your strategy and ensure you have a clear focus in execution between milestones
  • Comprehend your key metrics to communicate
  • Figure out which investors to pitch and ensure you connect with them the right way
  • And many other nerdy type things…

However, will they actually do a good job?

Often the pitch decks prepared by professional fundraisers are far worse than those founders have made themselves; they overlook important insights into the business and often the advisors try to justify their fee by making unnecessary models that no one needs, or wants, to see. They’ll also be sure to put their logo (not yours) on every slide and purposefully hold back information from potential investors to maintain their privileged relationship.

Vincent Jacobs, Kima Ventures

This is very true! Doing your material right is time intensive, complicated and requires a decade of studying startup land. I kid you not. Most decks and models I see where people paid a consultant to help them are shit.

  • The models don’t focus on what actually matters. They are often done by former investment bankers most characterized by a 3 sheet integrated model (No one gives a toss about your balance sheet unless you are in fintech)
  • The decks, oh the decks. They are not good. I know how much founders struggle with decks

How do I know how hard they are and that most material sucks? Because I have consultancies that do them. I started Perfect Pitch Deck to help founders, not to make money. Writing pitch decks is a nightmare, but someone needs to help (that’s not mentally special).

They know who the investors are and they can make intros

Who the heck are all the investors? You likely know who the big names are if you have spent anytime reading startup land, but there are a dick tonne of investors you have never heard of and most likely will be the ones you raise from.

There are also a lot of different kinds of investors who may suit you and your stage:

  • Angels
  • U/HNWI (Who don’t normally do angel)
  • Family offices
  • Seed funds
  • Big funds
  • Corporates
  • Institutional investors

No one on earth knows all these folks and you sure as heck don’t either. People with deep relationships can make warm introductions to these investors which puts you in a far stronger position. This assumes that the investors actually know each other and the relationship is positive.

If you are looking on Linkedin for 2nd-degree connections I highly recommend you ask them ‘How well do you know Jim and would you be best placed to make a warm intro?‘ I do this a lot and I can tell you I often get ‘We met at a conference once‘, ‘We aren’t really on the best terms at the moment‘ etc. Glad you asked now, right?

I have only ever been on one fundraise where there was a well-known firm also raising. They had a specific list of investors that they knew well and believed the startup would be suited to. They weren’t going to outreach to random ass people. Good raisers do not promise the earth and will express their limitations.

Who are typical fundraising advisors?

The categories of fundraising advisor are:

  • You: No shit Sherlock
  • You have a full-time person: You are in the big leagues already and raising hundreds of millions
  • Failed investment bankers: This is a big category. The issue is they don’t really know startup. They knew some people and want to keep the relationships open. The issue is once you aren’t in banking, everyone believes you can’t help their career so they don’t give a toss about you anymore.
  • Kids with a little experience: You find the odd chancer who thinks they are ready for the big league. They occasionally get some crap startups who are raising $150k
  • Former founder who has raised before: There are a few folk around who have actually raised money before and will help you typically for a fixed per hour fee. You can find them on upwork. I know one
  • Lesser known ex-VC types: Maybe they retired or maybe they got fired. The sad reality is that the advisor landscape is populated with people who lost their job, can’t get back in and are biding their time. It’s sad but it’s hard to get in and stay in the top tier
  • 2 man shows: If you find a website, 99% likely it’s one man and his dog. They might be ok, but in actuality, they couldn’t get a job
  • Slightly predatory firms: There are some fairly professional raising companies around. The website looks like it is a full-service firm. The issue is they will gouge you and will accept most clients. They will charge about $50k upfront and ask for 10% of your raise! No joke
  • Larger, well-regarded firms: There are very few of these. They will be selective if they will work with you. I know one startup that had to chase them for 18 months before they got them on board. You are likely raising about $20m+ at this stage

What do professional advisors charge?

The fees for a fundraising advisor fall into these boxes:

  • Retainer: This could be a lump sum up-front or a monthly charge. This is to cover the cost of them doing documents and shizzle for you. A lump sum could range from $5-$50k
  • Success fee: This is normal and what they are working for. They take a % of the whole round or in some cases (if negotiated), a % of the money they specifically bring in. This will be 1% to 10%
  • Warrants or equity: Some people will try also get some equity upside. Typically this is about 2.5% of the round, or thereabouts

What is and is not predatory is a little contentious here. If you are late stage then a combination of the above can be ok. If you are early stage you don’t want to be paying a retainer and should dodge the warrants/equity. Or, you might want to swap the success fee in cash for equity, which is really a better deal for you and means the raiser is actually in love with your startup too. Just not the easiest thing to get. I get asked a lot to do this and I always say no outright unless I know them. Why? It’s going to take me hours to figure out if actually want to.

Generally, you don’t want to pay any retainer. If you ask me to help you raise I will likely say no, but what I would do is charge specific amounts for tasks. A deck is $4k, a model is $5k etc. These are substantial amounts of work and they are specific outputs.

Success fees that fundraising advisors charge

You might think the most obvious way to compensate a fundraising advisor is a straight up number like 5%. That’s not the case. You want to tranche the fees so the more you raise the smaller the fee gets.

This is firmly established in investment banking lore. Tranched fees are called the ‘Lehman formula’ after the now-defunct investment bank. Under the ‘Modern’ Lehman formula the rates are (Bear in mind this is more for investment banks):

  • 10% of the first $1 million, plus
  • 9% of the second $1 million, plus
  • 8% of the third $1 million, plus
  • 7% of the fourth $1 million, plus
  • 6% of the fifth $1 million, plus
  • 5% of the sixth $1 million, plus
  • 4% of the seventh $1 million, plus
  • 3% of everything above $8 million.

Jean de La Rochebrochard is a Partner at Kima Ventures (Which is an altruistic early-stage fund, think 500Startups). He raises and charges in France:

  • Up to 2M€ = about 6%
  • Up to 4M€ = 5 to 5.5%
  • Up to 6M€ = 4 to 4.5%
  • Above 6M€ = 3 to 3.5%
  • Math example: 2M fundraising = 120k€, 4M€ = 220K€, 6M€ = 300–310K€, 10M€ = 420-40K€

But this is not going to work globally. Other factors you need to account for include your industry and your country. The more ‘inefficient markets’ (read shitty countries) are, the higher finders fees are. In Africa, this could be 10% or more. In China, finders fees of 5-10% are common.

For larger deals you might expect something like:

  • 0 to $50m: 4%
  • $50m to $200m: 3%
  • $200m and above: 2%

This isn’t a big industry so negotiate. For normal countries, I think 4% on average is pretty fair up to say $20m and something more like 1-2% for really big deals.

Why use a fundraising advisor

It’s really hard

Raising is a bitch. If you can get help to raise more, in a shorter period and you can still run your startup, without getting gouged, what’s not to love?

Here is what a founder thinks:

I think maybe before the proliferation of crowdfunding platforms, it might have been looked at as Loser-ville to enlist a third party to help you fundraise. But the reality of it is, fundraising is a time-consuming, shitty beast that sucks up all of your time as a founder. The more eyes and ears that you can have out there helping you raise, the better.

So yes, if you’re the next Slack and you have every top investor in Silicon Valley chasing after you, then don’t pay to get help with fundraising. But if you’re like most startups that need an extra boost, you should be willing to open up the funnel, even if that means paying for it.

Mark Thomas, Founder Zensports

99.999% of startups are NOT Slack!

You don’t know what you are doing

Holy crap there is a lot to learn… and a lot of rookie moves like asking for an NDA. No investors will not sign your NDA!

Most accelerators don’t offer much value beyond ‘promising’ to help you raise after the programme through a demo day… yay. And you pay a chunk of equity for the privilege.

You don’t get bespoke help to close the round. Would you rather pay for some office space or for someone to take you through an entire fundraising round? It might actually be cheaper than going to an accelerator. Funny accelerators don’t have the same bad name that fundraising advisors do who would typically charge less?

You don’t get feedback to learn from and they might / read between the lines

Apart from self-learning; fellow founders are usually happy to share their experiences and connections for free, VCs are happy to answer questions and give feedback on pitches and your lawyer (who is paid, but for a role that is actually important) is there to advise you on all your legal questions during the process.

Vincent Jacobs, Kima Ventures

Sorry buddy, this just is not true. VCs never give founders real feedback after a meeting! I’m not kidding. It’s super annoying. I mentioned the blog to read above about how to know what feedback means (Under ‘They understand the process’).

I had a call last week with a founder who is raising and he said to the investor ‘Look, I’m not a kid. I know you don’t give feedback and why, but I need to learn. Can you give me some real feedback?‘ He didn’t hear back. I actually do this myself when I am raising and I actually get feedback fairly often. VCs need to know that you actually get it before they will say something. The fact I was a VC obviously help me build a bond that most founders won’t be able to pull off. It’s totally worth trying though.

Side story. I actually do the same with doctors. When they aren’t sure if you have something I get them to tell me things by saying ‘Look, I’m educated and stoic. Most of my friends are doctors. Bla Bla‘ and the times I asked they actually told me. All about making them feel you get it.

Anyway, someone who really gets fundraising like me can listen to your feedback and tell you what it actually means so you don’t go on thinking Benchmark is actually likely to follow or lead.

You don’t have a network and want access to one

It’s so ironic. VC land exists to fund startups and they expect founders to have connections to them already. No, you don’t know all these feckers! But tough shizzle- they think you suck if you can’t get Ron Conway to intro you to Roelof Botha. I know it’s a joke.

What you are probably most hoping for with a fundraiser are the intros. Ok, but it really is a ‘big if’ if this advisor actually knows anyone and those people respect them. They could be cold emailing as you could instead, for all you know!

Some people really do have a big network, it’s just less people than you think.

You can spend your time on higher value add things

Fundraising Advisors are a cost of opportunity for good entrepreneurs. It allow them to save time and energy. Their job is to put together the right materials, to contact investors in order to organise meetings, to follow up with them, to keep up the momentum and to help you with negotiations in order to optimize and maximize the whole process towards a good closing.

Jean de La Rochebrochard, Partner Kima Ventures

Just because you are raising, doesn’t mean that your company suddenly works like magic. Fundraising is a huge time sink and investors are expecting progress on huge week-on-week growth whilst you are raising! It’s like managing 1,000 spinning plates! You can’t do it without help.

What founders should typically do is have a cofounder take over running the ship and making decisions whilst the CEO is away. Yes, that is scary!

If you can find someone who knows how to raise they can save you a lot of time on things you don’t need to be doing, or suck at so you can focus on growth. There is a lot of things someone else can do, but pitching isn’t one of them. I want to make that super clear, even whilst I am trying to make this blog neutral on this topic.

Even if you don’t use a raiser, it could be helpful to have a smart intern or someone else on the team help coordinate and manage thing so you can save time. But moving on.

You are in a sucky location and need a network

What if a start-up is is not fortunate as the start-ups in hot areas like Silicon Valley or New York? It’s usually WAY harder for start-up in Malaysia compared to SV.

Joshua Yap, Founder

Yeah, it helps to be in the Bay Area, even if you are in America. If you are in Nepal you are pretty much fecked. I weirdly have people from these countries reach out to me to ask for help. And no, I can’t really help them. It just sucks.

If you are in Pakistan, go to India. If you are in Malaysia, go to Singapore. If you are in Boulder, you prob need to treck to NYC or SF.

Theoretically, an advisor with the network can help you access all these people in cities you may never have been to.

Why not use a fundraising advisor

If you Google, 99% of feedback is to not touch a fundraising advisor with a 100 ft barge pole. And this is actually the right advice, generally.

Working for an early-stage investor, I receive many emails from fundraising advisors, corporate finance advisors, placement agents etc. to tell me about the early-stage startup they represent and their fundraising plans. “Are you free for a quick call this week?” the advisor always asks.

The founders of these startups have been convinced that only these fundraising advisors hold the keys to the venture capital kingdom and are able to do things the founders can’t do themselves. This simply isn’t true. Fundraising advisors are parasites trying to suck as much money as possible out of the startup and working with them will often leave the company much worse off than if they were to raise funding alone.

Vincent Jacobs, Kima Ventures

I reference my friend Vincent a lot (He left Kima, btw), as he wrote a very against blog on fundraisers so it helps me make my points without saying them. Also, there aren’t many good blogs on this topic.

Investors expect the CEO to be the fundraiser

When investors see some random intermediary raising money, what they see is a startup without a CEO. They see a ship without a captain. Because it is the CEO’s job to raise money.

Investors really do expect to be talking to the CEO when fundraising. They think something is wrong if this is not the case. I have experienced only two exceptions:

  • The person pitching really knows their shizzle: I have done a large raise and done 99% of the pitching/process. I never had an issue once. Why? Because I know my shizzle. I can pitch better than the CEO. I also know when to shut the feck up! I know when the CEO needs to be pitching. I was also the ‘interim CFO’ and not termed a fundraising intermediary
  • The company is late stage: When a startup is huge, I’m talking unicorn land, there is often a role for someone who leads the raising. This is not a problem. Sure they will talk to the CEO eventually, but not till the investor has been filtered (Yes, Unicorns get to pick VCs)

Yes, VCs are ok being directed to someone else when a company is huge

For fun, here is a real example of me emailing the CEO of a unicorn offering an intro to a top tier fund.

On Sunday, February 5, 2017, Alexander Jarvis <xxx> wrote:

Hey xxx– We last met up a while back at xxx’s private event in xxx- just before you were getting married, I believe. Saw you were at xxx’s CNY party.

My friend xxx (Now Partner at xxx) is over to xxx this week looking for growth deals to invest in, and to write xxx. He mentioned you guys were at HBS but haven’t connected for a while.

Cool for me to connect you guys?


Alexander D. Jarvis


On Mon, Feb 6, 2017 at 4:31 PM, [CEO] <xxx> wrote:

sounds good. thank you for thinking of us. appreciate it. =)

please meet xxx. President of xxx. xxx drives all IR.


From: xx <xxx>
Date: Monday, 6 February 2017 at 3:57 PM
Cc: Alexander Jarvis <xxx>
Subject: Re: Reconnect you with xxx, Partner at xxx, from HBS?

Hey Alex,

Good to meet you.  Pls feel free to connect xxx and we’ll take him through the it.  Thanks!

[CEO] to bcc

Why are you in the room?

Let me tell you a story about when I was a VC and there was a fundraising advisor who came to the first pitch.

A startup came with 3 founders and an advisor. These were quality folks with great CVs. They were on the ball (They since have raised double digit millions).

They started introing themselves. The advisor was fairly quiet. Now you probably know that I’m pretty direct…

Why are you in the room? …can you leave please?

I didn’t understand why the hell they had an intermediary in the room. I wasn’t interested at all in anything he had to say. I wanted to talk to the team. I haven’t seen him again.

They don’t have the relationships they say they have

This is something I hear a lot from friends who have used fundraising advisors. They say they know all these top tier funds and well, they don’t. It’s a lie they tell naive founders to get $5k out of them and 10% of their fundraising round.

VCs are busy. The only way to really build friendships with them is to be a VC too (Or really famous). It’s just a fact. And once you know them, you need to maintain a relationship for it to be worth something.

Think about it. If you are hiring a fundraiser mainly for connections, whether the investor will open the email, read the deck, respond and give you a meeting, on the terms of a positive warm introduction is a big question mark.

This one is usually completely false. All corporate finance advisors who have contacted me are people that I have never met and have no relationship with what-so-ever (despite them telling their clients how well they know me). In most cases it seems these advisors simply send the company’s deck to a long list of investors in BCC without any regard to relevancy.

Vincent Jacobs, Kima Ventures

VCs don’t want to talk to them

If you were an investor, would you want to talk to random intermediaries? I don’t need to bore you here, here’s a consensus from some investors.

It’s really not a good idea. While investment bankers and ‘finders’ are an accepted part of the ecosystem when it comes to later stage deals, they are verymuch frowned upon in the early stage world. Few—if any—venture funds, angel investors or accelerator programs will even take an introduction from a professional intermediary.

David Rose, Angel investor

I’ve found it best on all sides to avoid paying brokers, and to stay far away from any deal that involves brokers.  There’s a huge ick factor even setting aside (or perhaps because of) the questionable legality of the practice.  It’s shady.  Imagine that you’re a supserstar angel investor.  Your doors are open, you screen any business plans that come your way if you can.  Or perhaps you don’t.  Someone has to have an introduction, a calling card from someone you trust.  Would you trust someone who is using their connection with you to make money?

Gil Silberman, Founder and Chief Legal Officer of Equidate

Brokers that supposedly help you get funding are more likely trying to scam you. Investors want warm introductions from people they respect, and, if you haven’t guessed yet, brokers are not people they respect.

Brett Fox, Former CEO of Touchstone Semiconductor

“Should I use a startup funding broker?” The answer is, almost certainly not. As an investor, I have yet to receive any good deals from startup funding brokers. The process of raising money is so central to your business that a founder who thinks that he or she can outsource the process is already questionable. As a result, the startups that tend to come through brokers tend to be the worst, most rejected, hairiest ventures around. Most likely, every halfway decent investor they tried reaching out to on their own already turned them down and this is a desperation play on their part. No thank you, not interested.

Andrew Ackerman, Managing Director at Dreamit

At early-stage, most VCs are looking to invest predominantly in the founding team so you and your team are the main thing that is being judged; any interaction that is with someone else is negative as it doesn’t help to understand the founders and will only serve to damage the investor’s image of the business.

Vincent Jacobs, Kima Ventures

They don’t really get the best deals, so won’t VCs block their emails after a while?

Firstly, really great companies don’t have a super hard time raising. They don’t need an advisor for the most part. Maybe some advice, but not with the intro part.

So now we have everything else. That’s the best most of these fundraisers are going to get, so it’s not the best deals. Frankly, if an intermediary can get the best deals consistently, they would be a VC. The awesome deals they kept sending investors would encourage them to hire them. In which case, there is no good fundraiser left.

Fundraising advisors don’t care who you raise from, not really

As a founder you want money. Worse comes to worst you don’t really care who it comes from, so long as you get the cash you need to grow. But you’d really love to raise money from top investors, right?

Well, why do fundraisers give two shizzles who you raise money from if their commission is based on closing the round? They wouldn’t. Well, the one reason why a good raiser would want to raise from top investors over lesser quality investors is that it helps build their relationships and credibility… to potentially get a job with them.

They can be annoying

You have paid someone to help you raise. If they are doing the whole outreach thing, then you are imbuing them with your reputation by proxy.

Their sole goal is to close a deal as fast as possible to make a % of your round. Maybe they have some intern spamming VCs on a schedule, constantly following up as they don’t really have a relationship. The VC is going to get annoyed with your company if they are being hounded. This is kind of hard to explain. When I have had intermediaries reach out you just want to delete their email. They try to sort of anonymise who the startup, the information is in a weird form. Oh, the most annoying thing is that the deck is about the fundraiser. Their logo is on each page instead of yours. I’m not even joking, I once got a deck where the first 10 pages was a sales deck talking about the fundraiser. You can’t make it up.

No one really gives a toss about most raisers. Why do they want to hear from them? As I said, they don’t have the best deals.

Fundraising advisors may do nothing!

This doesn’t apply to everyone, but there really are some dodgy geezers about. And if you find one of them (Or they find you) what are you going to do when they take your money and give nothing back in return? Here’s a quick horror story:

In my experience, using brokers to raise your funding rarely if ever is successful. They pride themselves by selling themselves how many investors they have within their network. In fact, I once paid $5k up front based on an amazing sales presentation, credible referrals, etc., then once I paid he essentially disappeared! He never once introduced me to a single investor.

Mark Sendo, Founder

Good people don’t do fundraising long / There aren’t many good raisers around

Let’s face it, if you really want to make money fundraising and are good at it, you would be doing private placements for hedge funds and private equity. Why would you want to mess about raising $500k for some pre-seed round with a ‘founder with a dream?’

Ok, but it’s not easy to get those jobs. So maybe you start hustling and startups is an area you know well. Well, eventually you’re going to meet the right person who is going to make you an offer you can’t refuse. There’s one less ‘good’ fundraiser in the game. What’s left is a declining talent pool.

You should NEVER use an external advisor to raise money. The reason is that most of them suck! Sure, there are exceptions to the rule and I do know of a few guys who actually do have the connections and can help you navigate VC waters. Yet, there are so few that the chance of you finding someone worth using is less than your chances of actually raising a round on your own. Even worse, most guys who are really good at it do it for a while and then move on. Hence not only are they hard to find, they disappear quickly.

Paul Jozefak, Former VC

They are hard to find

Try googling for a fundraising advisor firm. I’ve tried and I can’t find anyone. There’s frankly not enough money for anyone to really invest in SEO and paid marketing. So good luck finding someone. Frankly, if you asked to recommend anyone, I would really struggle.

…and they may not work with you

If you do find a ‘good’ advisor, do they even want to work with you?

I rarely do fundraising. It’s a lot of work. I only want to work with companies which are pretty much sure bets. Otherwise why take the pain? Any good firm is going to be pretty selective with whom they work with and it will almost always be for larger Series-A post deals.

They cost you money

It is acceptable, but not optimal. Investors have a very strong preference for seeing capital deployed to build the team and get traction in the marketplace.

David Pethick, Founder EnergyUp

Fundraising advisors aren’t super cheap.

Let’s say you take a bum deal and give an advisor 10%. You are raising $1m. You are paying the raiser $100k. That’s 100k out of your raise. You don’t get the 1m you really need, you get 900k. That’s a few months off your runway. That’s a good developer for a year that could build out your platform. So you won’t be surprised by…

VCs don’t like your money being spent on anything which doesn’t grow you

Following on from the last point, VCs aren’t idiots. They know if there is some intermediary emailing them they are getting paid somehow and more than likely it’s coming from the fundraise.

Whilst you are technically selling say 20% of your company for investment, the VC still sees it as their money as your company sure as shit isn’t worth the $5m you raised at. It’s only worth something if you have the money to pay for the resources (staff) you need to build your startup into something that is worth money.

Turn the tables here. If I get you to give me $25k as an investment and I use all that money on bottles and models in Ibiza, you’re going to be wondering what the feck? As far as investors are concerned, anything going out of the bank which isn’t for growth is bottles and models.

You could lose the investor

All documents that you sign with investors will have a section called ‘reps and warranties’. There are basic things that you promise are true, mainly as investors can’t do complete due diligence. Now in the reps and warranties, there will often be a clause that says you haven’t used a broker. It will read something like this.

No Broker. Neither party has engaged any third party as broker or finder or incurred or become obligated to pay any brokers commission or finders fee in connection with the transactions contemplated by this Agreement other than such fees and expenses for which it shall be solely responsible.

Uh oh. What if you have gone down a process and you are about to sign and you suddenly read this clause. You have actually used a broker but no one knows about it. What are you going to do now?

Many, perhaps most, investment documents contain a representation and warranty by the company that no broker is involved in the transaction.  If you do find that perfect investor, it would be a shame to lose the deal because you made a deal with someone who said they could find you money. Often they do lie – they misrepresent themselves as having money or working for the investor, and they tell the investor they work with you.

Gil Silberman, Founder and Chief Legal Officer of Equidate

Does your prospective fundraising advisor have a licence?

You probably don’t know this but in many countries, your advisor needs to have a license. This is 100% the case in the US. In the UK you technically do, but it’s not quite clear.

If you have an advisor in the US, they absolutely need a broker-dealer license from FINRA and be registered with the SEC. This falls under something call Reg-D.

Regulation D (Reg D) is a Securities and Exchange Commission (SEC) regulation governing private placement exemptions. Reg D allows smaller companies to raise capital through the sale of equity or debt securities without having to register their securities with the SEC.

Getting this license isn’t an insignificant amount of time and cost. Most firms who go through the time and capital it takes to maintain a license do not want to deal with startups.

If investors are unhappy with a deal and they figure out that your broker didn’t have a license, they can use this as a legal basis to get their investment back under what is called investor right of rescission.

How to set up an advisor relationship

In general, it’s pretty clear that the notion of hiring a firm to represent you in most circumstances is a no no. That is not to say that you can’t make something work, it’s just a little more work

Hire a fundraiser as an interim CFO

If you find someone awesome, what you should do is hire them as your interim CFO on a full or part-time basis. They have email account, it says this on Linkedin and for all intents and purposes they are part of the team. Depending on their knowledge and background they can lead the round in many regards. But really, you shouldn’t totally rely on them. If they raise money for you, great. If not, fire them.

What about the license stuff I mentioned? As a company officer, they are entitled to help raise money without a license.

How you manage the whole success fee thing is a little more tricky. You’re going to pay them one way or the other. It’s cleaner if you are giving them stock, but at some point you are likely going to have to explain where $100k went.

You need to be leading the raise though

Don’t bank on miracles. They are there to help but not much more. They are a plan B. Your plan A is that you will get the round done regardless.

When I have raised for founders I was always the interim CFO. And most of the time a lot of the money came through the founder themselves from investors they met at an award or whatever. I obviously make intros but the best investments come when the investor is looking for you and that is because of the CEO. A good raiser can help a heck of a lot in managing the round, advising and hand holding. Especially when you raise from family offices or just plain rich people, they always have a minion or CFO type themselves that does 99% of the work. I would work with that person doing the deal and just update the CEO when they needed to know something.

Something I want to reiterate and make clear is that when it comes to important chats and important pitches, it is all about the CEO. The advisor should stay the hell out. The investors is deciding whether to bet on the CEO, not the advisor. If the advisor tried to get too involved at these critical decision points the investor would get annoyed pretty quickly.

If your ‘interim CFO’ really knows how to raise AND the company, they can actually do the initial pitches. To do this though means investing a lot of time getting to know the company and even the technology. If they don’t there is no way they can pitch themselves. Once an investor is interested they need to deftly organise a call/meeting with the CEO and at that point they don’t need to attend. It’s about the CEO building rapport and them telling their own story, not the investor engineered one.

You the founder need to:

  • Reach out to investors (in most cases)
  • Do the first pitch (in most cases) and the partner meeting
  • Know your vision and have a compelling narrative
  • Know all the numbers for your excel financial model and how it works
  • Know everything in the pitch deck
  • …Basically, know everything and ‘do’ everything you need to

For most of everything else you ‘can’ get help from some kind of fundraising advisor.

Do not hire someone to ‘make a few email intros for you.’ That is super low value. Unless the advisor is friends with the investor, and few people actually are (despite what some will say) most investors won’t talk to anyone other than the CEO.

How to tell a good and bad fundraising advisor apart

As a rule, assume a fundraiser is a waste of time unless proven otherwise.

  1. Have they worked in VC? Have they built startups you have heard of? Have they raised before?
  2. Do they do fundraising full time? Or do they do this occasionally if they really like you?
  3. Who have they worked with before? Ask for references. Understand that it’s a big ask to request to talk to former founders. Why the hell do founders want to spend time talking to you? Anyway, just saying.
  4. What investors do they know? If they can mention not only firms, but who they know at the firm (and how) it’s a positive sign. If they will not provide any investor names until you sign their exclusive raising agreement, they’re full of BS
  5. Check for sector and stage. Some people can cover everything, but for the most part, they will have a sweet spot for say $5-10m, series-A, SaaS.
  6. See how smart they are and how long it takes to understand your business. Really smart folks can understand your business really quickly. Can they pitch you your business without thinking?
  7. How do they answer questions? If they are idiots they won’t give any specifics.
  8. How are they charging you? The ideal scenario is that they take equity, but most people are a hard pass on that. If they are charging the top end of ranges, you can be sure they are a bit predatory. Unless you are getting really tangible outputs (Top quality deck or model) then you shouldn’t pay a retainer unless you are with a top firm at later stage


You should be able to make up your own mind now!

Comments 11

  1. This was a really great article. We have been trying to raise for two different SaaS companies we started. One company is in pre-seed state and one is in seed funding state and we have started considering an investment adviser that came to us through an internal connection. This article hits close to home and provides some great food for thought. Thanks for taking the time to articulate all this information.

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  2. Very informative and comprehensive coverage. Breaks down the why and why nots of using Fundraising Advisors. What really hit me most is that the VC needs to hear from the founder himself, not someone else. Many thanks.

  3. I found this just as I was talking with someone who wanted to help raise a seed round. His numbers started at 12%, then somehow ended at 20% plus another 10%, then a percent of the equity raised. Yes, those numbers are correct. This article was brilliant in many ways. Thanks.

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  4. It’s a great piece of work. Great in detail and insights. There is some, not so favorable, mention about most intermediaries being from India. That touched a sensitive nerve as I am from India. And I help start ups raise money. However, being a Strategy Consultant my involvement starts rather upstream. It is mutually easier to take the relationship to collaborate on raising money if advice on building the idea is useful.

    It is a truism that the VCs don’t care for relationships and rightly so. But it is also true that many prefer a warm introduction; to the extent an idea is curated it is easier for them to take it seriously and reach a quick decision whichever way. I am upfront with potential clients in saying that if I know a VC it will only get us a cup of coffee. Beyond that it is the merit of the idea and the team that counts.

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      Pradip – You’re correct, that was unpolite of me.
      VCs are real people and I think people put them on a pedestal. It is the same as dating. If they aren’t interested in “your type”, it doesn’t matter how hard you try.

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  5. Hello , my name is Guy Malul . I am involved with small unknown yet Israeli startup company , possessing cutting edge AI/ big data technology , we developed proprietary LLM, which is a head of all the others in the the industry , including ChatGpt-4 by any perimeter , Sound overconfident ? I know , Getting this a lot , we raised 20mil so far and need capital to complete development ( 6-12 of R&D) Guy Malul 201-681-4109. Thanks

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