Finder (capital raise)

Definition

Someone paid to introduce investors to a raise they do not run.

Why It Matters

The federal guide to broker registration lists finding investors for an issuer, even in a consultant capacity, among the activities that can make somebody a broker, and an unregistered broker effecting securities transactions is acting unlawfully. A search fund raise is a securities offering, so a stranger offering a warm network in exchange for a share of what it brings is the arrangement that question turns on. Ask whether they are registered and ask what they are paid on. Then put the agreement in front of a securities lawyer before signing it, because the consequence of getting this wrong lands on the raise and on the person who ran it.

In numbers: A 5% fee on a $500,000 search raise is $25,000 paid for introductions, and the same percentage on a $1,500,000 equity round is $75,000.