Should a VC GP use a placement agent or fundraising adviser?

The compliance question, first

Anyone paid in connection with capital raised raises a status question. The analysis is about function and compensation, not about job titles, and it is a question for counsel in every jurisdiction where investors sit.

• The statutory definition. Under the Securities Exchange Act, a broker is any person engaged in the business of effecting transactions in securities for the account of others. Whether an introducer falls inside that is a facts question, and the fact that most often matters is transaction-based compensation.
• Where the person is permitted to act. A person authorised in one jurisdiction is not thereby authorised in another, and marketing into a country generally engages that country's rules regardless of where anybody sits.
• European pre-marketing. Directive 2019/1160 permits pre-marketing by a third party only where that party holds one of the specified authorisations or acts as a tied agent, and subject to the same conditions that apply to the manager.
• United Kingdom notification. The Financial Conduct Authority's national private placement regime requires specified categories of manager to notify before marketing certain funds, with a fee payable on each new notification.
• Government investors. Where a public plan or other government entity is in scope, the codified adviser rule makes it unlawful to pay any person to solicit a government entity for advisory services unless that person is a regulated person or an insider of the adviser, alongside the two-year prohibition that follows a contribution by the adviser or a covered associate.
• You cannot rely on the intermediary's own assurance about their permissions, which is the single most common shortcut and the one that leaves the manager exposed.

Agents and advisers are not the same engagement

The words are used loosely and the arrangements differ in ways that matter to both questions above.

• A placement agent is engaged to introduce investors and is typically compensated in relation to capital raised, which is the compensation structure that most often triggers the status question.
• A fundraising adviser is engaged for work product and process, meaning materials, targeting, preparation, and project management, usually on a fee for time or a retainer, and typically without a success component tied to capital.
• A hybrid arrangement, with a retainer plus a success element, is common and is closer to the first than to the second for the purposes of the compliance question.
• An introducer paid nothing is a different case again, and still not automatically outside the analysis if there is any compensation, including in kind.
• The practical consequence: an adviser engagement is usually simpler to structure and does not solve the access problem, while an agent engagement may solve access and carries the heavier analysis.

The five conditions, tested in order

Engage only if the first two hold. The remaining three decide whether it will work rather than whether to consider it.

• Access you genuinely cannot reach. The arrangement is worth considering only if they open doors you have tested and failed to open yourself. If your problem is that your list was never right, Blueprint's page on scoring and prioritising prospects is the cheaper fix.
• Economics that work at your fund size. A success-based arrangement is a fixed cost against a variable outcome, and on a small fund it can consume a meaningful share of the management fee for years. Model it against the fee rather than against the fund.
• Capacity to support what they start. An agent generates meetings and diligence requests; the manager still attends and answers them. Blueprint's page on a manageable pipeline covers what that load actually costs.
• Alignment on which investors are approached, since an agent's relationships determine your investor base as much as your own strategy does, and a poorly matched introduction consumes the same capacity as a good one.
• A clean exit. What happens if it does not work, who owns the relationships afterwards, and whether any tail obligation attaches to investors introduced but not closed. This is the term managers most often discover late.

What to ask before engaging

Ask all of these, and write down the answers.

• In which jurisdictions are you permitted to act for us, and on what basis?
• Which specific investors would you introduce, and when did you last speak to them?
• Which of those have committed to a first or second fund in the last two years?
• How are you compensated, on what base, and over what period?
• What tail applies after termination, and to which investors?
• What will you do that we will not, and what will you need from us weekly?
• Which of our target markets require a notification before you contact anyone there, and who makes it?
• Have you worked with a fund of our size and strategy, and may we speak to that manager?

Evidence, judgment, and assumption

The decision is usually made on assumption, which is why it disappoints so often.

• Evidence. Named relationships, verifiable placements, references from managers they worked with, and a written answer on permissions.
• Judgment. Whether their relationships match your strategy, which is arguable and worth arguing before signing.
• Assumption. That access converts, that a name on a list means a live relationship, and that an agent will prioritise a small fund among their mandates. All three are common and none is evidence.
• The test: ask for the introductions before the agreement, at least in outline. A partner unwilling to name anybody before being engaged is telling you something about how the engagement will run.

What this page does not tell you

It states no fee level, no market rate, and no tail period, because no verified source publishes them for venture placement and an invented figure would be the most repeated sentence here.

It also reaches no conclusion about whether any particular arrangement is permissible. The codified text above sets out definitions and prohibitions; applying them to your facts is a question for securities counsel in each jurisdiction where investors sit. The Securities and Exchange Commission's own small-business guidance pages refused every automated request while this page was researched, so the rules quoted here come from the codified text published by the Legal Information Institute.

This page is educational and general. It is not legal, securities, tax, or investment advice.