Fundraising Finders Fee

This can be a tricky area as a lot of "finders" are trying to function as a broker-dealer for which they are not legitimately licensed. Often, parties will turn a blind eye. Sometimes they don't. I know equity investors who won't invest, as it's a premium that's taken out of their investment that they intend for your use. I have seen quarterly retainers matched with a 5% (to 10%). Watch out for clauses that requires payment on a deal they don't broker.

Leslie
I have been involved with many private placements over the years. While there is no standard fee , in my experience 8-10% is typical of small offerings, with the percentage decreasing as the size of the offering increases. Thus in your example you might suggest a sliding scale of fees . Most importantly please note that the SEC and most states take the position that a person receiving success -based commissions or finders' fees in connection with any offering of securities must be a registered broker/ dealer . Payment of finders' fees to a non registered person or firm is a violation of the Federal securities laws (and the securities laws of many states) and could subject the recipient to an SEC administrative position and other penalties . Moreover, such payment will likely adversely affect the exemption from registration of that offering by the company, will adversely affect the ability of the company to obtain a legal opinion that its securities were validly issued , could subject the company to SEC enforcement action and could require the company to offer rescission to the investors.
Jonathan

This does sound like you are on the receiving end of the raise and are inquiring what you might pay. Many go down that road, I would sincerely seek out a few people who have raised equity and talk with them about making this move.

But generally I would tell you, if your attorney doesn't know the answer to this question and can't give you advice about it - you have the wrong attorney for closing an equity deal.

The typical fund raising fees for my firm are 3%-5% for an equity investment, 2.5% for a joint venture and 1% for debt.

Is it possible to have this looked at from a perspective of finding a book of business, instead of finding investors? There's been intelligent answers already on potential implications of brokering a deal with someone who isn't licensed.

Aren't there standards on how much commission someone can receive if they bring in a certain amount of revenue/book of business? How would this be much different? I am sure it is, but for the sake of my education, let's hear it.

I would strongly advise against using an investor "finder" during a seed/series A investment.

From an investor's point-of-view a "finder" will be asked "why aren't you investing in Company X?" - opening up a can-of-worms of discussion and ultimately sabotaging your investor relationship. Furthermore, finder's incentive is usually based on the amount of money you raise - over-funding in the early stages of a company will hurt future investments.

I would advise getting an investor to lead the round; an investor with "skin-in-the-game" will encourage other investors to join and ultimately close the round while efficiently maintaining a proper Cap Table

Finders fees are illegal according to the Jobs Act, the broker or investor must be registered with the SEC before discussions even get to a beginning point.

I am looking to do a fund raiser for my CRM product. Is it within bounds for a CFO to ask for a retainer fee plus a 5 percent equity stake to find an investor.