Why You Can’t Use A Broker To Raise Money
Wouldn't it be great if there was someone out there who could magically introduce you and your startup to every investor you want to meet? Wouldn't that be great?
And, yes indeed, there are people out there who will, for a fee of course, claim they will introduce you to investors. These people are called brokers. The problem is, in almost every case, hiring a broker is a scam that will not give you the results you want.
I'll explain why in this short video. I hope you like it.
Read The Video Transcript Below:
One of the questions that I get asked about is why shouldn't I use a broker to help me raise money? You know, brokers are independent people that will for a fee will help you raise your round of funding.
Now what's the problem with this? Why doesn't this work, which is obviously where I'm going with, this. Is why is this an issue? Well, first of all, your investors don't like dealing with middlemen who are going to take a slice of your company, either equity or money from you.
So let's say you're raising, let's keep the numbers simple here. Let's say you're raising a million dollars and your broker says, look, I'm going to get 10% as my fee. Well, that means that 10% of their investment has just gone away. Nobody likes this. It doesn't work from that perspective. So that's the big reason.
The second reason why you shouldn't work with brokers is usually they're full of it. They're not going to be very good. They're just trying to take your money. And the odds are that you're not going to get anything back from them.
So remember that when you do this, because it's just probably a waste of time and a waste of money. Now, this doesn't mean you shouldn't have people try and help you. I've helped plenty of people raise rounds.
What's the typical fee you get when you're somebody like me and you're helping people? Maybe it's a bottle of wine, that's it. That should be your expectations. If somebody comes to you and you say, "Hey Brett, can you help me? Or, Hey, whomever, can you help me?" And they want more than a bottle of wine, probably not the right people to help you. It's probably not going to work too well for you.
So use kind of the bottle of wine theory is kind of a nice one as a way to look at who should help you, raise rounds of funding and who shouldn't help you raise some funding. I'm [email protected]. Have a great, great day.