Raising Capital Through A Placement Agent

Few entrepreneurs seeking equity investments have enough personal contacts with people that can offer adequate and available money. For those who don’t, one option is to engage an intermediary or placement agent to assist them in the process of finding potential investors. A placement agent usually refers to a person or firm that is a registered broker-dealer, but sometimes also includes “finders.”

Broker-dealers are regulated professionals or firms that have passed a series of exams and have gone through a lengthy registration process that includes interviews. Finders, on the other hand, are not generally regulated. According to federal law, a broker-dealer is “any person engaged in the business of effecting transactions in securities for the account of others.”

For purposes of this article, the key language is “in the business of effecting transactions.” A finder is someone not in “the business of effecting transactions.” Rather, finders infrequently bring investors and companies together, but that’s all they can do. By law, a finder is not permitted to pitch for the company, develop deal terms, or negotiate for or represent the investor or the company.

REO Capital is a cost effective way to outsource a Business Development team while controlling costs such as Healthcare, Social Security, Unemployment Benefits, Employment Salary Costs, Federal and State Taxes, Recruiting Costs, Training Costs, and the cost of hiring internal staff adds up to 3 times the cost of a salary for each employee!

You may ask, “how does one find a placement agent?” Typically, on the internet searching for Placement Agents or they find you. However, if that hasn’t happened, entrepreneurs can talk with their lawyers, accountants, or other entrepreneurs about their experiences with various placement agents in their area.

When selecting a placement agent, there are many things to consider. Probably the most important consideration is who are the LP Investors they represent. By using a placement agent, you are putting faith in their distribution channels. Below are some other considerations:
• Experience generally as a placement agent.
• Experience and success with raising comparable amounts of money.
• Distribution list of vast LP Investors.
• Knowledge and experience with LP Investors that will be a fit for your Fund and invest in Emerging Managers.
• Pre-existing substantive relationships with prospective accredited or qualified investors.

Contracts with placement agents vary significantly. Below is a list of areas that are commonly negotiated in arrangements with placement agents:
• Exclusivity.
• Duration – 12 month or 24 months.
• Compensation amount and type (e.g., retainer/monthly fee versus a transaction-based fee).
• Conference Events that give rise to completion.
• Additional services.
• Indemnity.
• Representations, warranties, and covenants.
• Use of affiliates to assist in process.

Once a company decides to engage a placement agent, finding the right one(s) under the right terms are essential. The placement agent may not only affect the success of your offering, but the placement agent may also affect the reputation of your company with the correct Branding, and could possibly bind you to a 24 month term contract, comprehensive, and set of services. REO Capital has a 12 month Contract renewable for a 2nd 12 months and will not bind you to an expensive set of services. REO Capital’s branding is vast across RIA firms, Wealth Management firms, Single Family Offices, Multi-Family Offices, Investment Consultants, Fund of funds, Corporate pensions, Insurance companies, Foundations and Endowments which will expose your fund to many Institutional Investors.

REO Capital – Is unique and different in many ways. So talk to us after you talked with other Placement Agents. REO Capital has been specializing in raising capital for Emerging Managers seeking new capital from $100 million to $700million since 2010!

REO Capital LLC

REO Capital, LLC

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