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FAQs | Funding

Finders Fees

Q: What are standard finders fees or other compensation for assistance with fund raising, acquiring strategic partners, etc.?

  • Fees seem to range all over the lot. The ones you have to be most concerned about are up-front fees, or retainers, because you need to do a lot of due diligence to see if you can trust the "finder" and soul searching to see whether you can afford the fee.
    • In terms of traditional finders fees for equity-type financing, the fee usually ranges from 5-10%; 5% being average and 10% being a swell deal. [David J. Simonetti, djs@projix.com]
    • Another common "success" fee is the so-called Lehman Formula: 5% of the first $1 million; 4% of the second, and so on. [Thomas Hasler, thasler@ix.netcom.com]
    • Some have asked for as much as 10% up front, 10% of the resulting company and 30% of the gross revenues of year three. For a deal size of $500K-1million, you may not be interested in paying that much. [M. Christopher Davies, mcd@dsltech.com]
    • Another option is to give equity instead of a cash fee. It may be as much as 15%. [Tracey Mathieu, MsTMathieu@aol.com]

Q2: What’s a typical fee for a headhunter?

  • For recruiting, a more common figure is around 20% to find a well-qualified candidate. The client then usually adds a "trial period" of 60 to 90 days. If the new hire quits within that period, the recruiting firm is obligated to refund the money if they can't find a replacement in that same period of time. In some cases, the headhunter can ask for 20% and ask to be paid on a graduated scale (10% on signing, 5% for the next month, etc).
    [Alex Duong Nghiem, alexdn@globalobjects.com]

 

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