What Compensation Can a Company Offer Someone Who Sources Investors?

A company can discuss fixed fees, retainers, or other compensation for investor sourcing, but the right structure depends on the work and applicable rules. Before offering a success fee, equity, or another benefit tied to capital raised, have your attorney review the arrangement. Compensation terms should match the person's actual responsibilities and the company's needs.

Start With the Work

Separate research and administrative support from investor solicitation or negotiation. A person may help build a prospect list, organize meetings, prepare approved materials, or track follow-up. Those tasks differ from contacting investors to promote an offering, recommending an investment, negotiating terms, or handling commitments. Describe the expected work clearly before discussing price.

Consider whether the company needs a one-time project, recurring support, or help through diligence. Agree on deliverables, time expectations, reporting, expenses, confidentiality, and communication approvals. Set out work that can be described and reviewed, with payment terms tied to that scope.

Compare Possible Structures

A fixed project fee can fit a defined assignment, such as researching a market or organizing approved materials. A retainer can cover ongoing work with a stated scope and regular reporting. A bonus or success-based amount may be proposed for a particular outcome, but it can raise regulatory issues when tied to securities transactions or investor commitments. Talk with your attorney before using it.

Some roles may involve equity, carry, or performance compensation. In The Single Family Office, I describe compensation packages for professionals that can include a share of carry or proceeds on deals they help close. That example concerns talent compensation and does not establish that such a structure is appropriate for an outside fundraising intermediary. The person's duties and legal status still need review.

Make the Terms Specific

Put the arrangement in writing. Define the services, payment amount or formula, timing, reimbursable expenses, duration, termination terms, and any limits on authority. State which investors or transactions count if a payment depends on an outcome. Clarify how the terms apply to existing relationships, indirect referrals, later investments, and transactions that close after the engagement ends.

Keep a record of completed work and communications with prospective investors. Review the proposed agreement with your attorney, especially if the person will be paid based on capital raised, solicit investors, or discuss investment terms. The introducer's licensing status may be relevant to the arrangement.

Protect the Company's Process

Make sure the company controls its offering materials, approved terms, and investor records. A person sourcing investors should know what they may share and whom to contact. Set a process to review changes to the scope or compensation before the work changes. If the proposed compensation depends on an outcome, have counsel assess it before outreach begins.

Choose terms the company can explain, record, and manage. Clear expectations help the company evaluate whether the work is producing useful investor conversations and keep payment disputes from surfacing at closing.

Read next: How should a founder decide whether to raise equity, debt, or a mix of both? and How much capital should a company raise to reach its next meaningful milestone?

Another attractive option is to include performance bonuses calculated as a percentage of the gains in a portfolio or some other means of additional upside for someone that is ambitious and wants a chance to prove what they can do.

Sources: The Single Family Office. Informational only, not financial, legal or tax advice.