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How to Use Investment Bankers as a Resource for Raising Venture CapitalInvestment Bankers can be a useful resource for raising Venture Capital. Most Investment Bankers have years of experience with funding private and public companies. This is another good avenue for you to explore in your search for funding. Keep a separate folder for all your Investment Banking contacts. I have worked with many investment banking firms over the years. They have either been clients of mine or I have represented private companies using them to raise funding. I have also represented
Hedge Funds
that funded companies where an investment banking firm acted as the broker. It is important to note that they are very important in the area of mergers and acquisitions. Most Investment Bankers are former brokers that worked on Wall Street. They usually have a wealth of knowledge and experience. Most of them have also developed significant contacts over the years. It is for these reasons that you should develop some contacts. Even if you don’t use them for your first round of funding, you may be able to use them later on as your company grows and evolves. As with any business segment however, there are good professionals and bad professionals. You have to be a little selective and conduct some due diligence on Investment Bankers you talk with. Be extremely careful of any firms that ask for an “upfront fee”. It is one of the oldest scams around.I strongly suggest you do not pay anyone an “upfront fee”. If they ask for payment of expenses, such as travel, make sure they are agreed to in advance and itemized. Asking for an upfront fee when they also get a commission is also an indication that they may not be that successful in actually raising money. Here is a short list of some things you should ask them and things you should investigate on your own: Check out their website and use www.google.com for as much information you can find out about them. Ask them how long they have been in business. Ask about the background of the people you will be dealing with at the firm. Ask them about funding they have done for companies in the past twelve months. See if you can call these companies to get information about the services the firm provided Ask them what their Investment Banking fees are. Ask them what services they provide besides raising capital. With regards to this last item listed above, some Investment Banking firms can be extremely helpful. They may review your Business Plan and give you some very important comments. These comments can be the difference that gets your foot in the door with some important funding sources. Some Venture Capital firms and other funding sources rely on Investment Bankers to source deals for them. They rely on them to screen deals because there are just too many of them. This is a valuable service and of course the Investment Banking Firm has to get compensated for this service.
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