Beware of Finders
Many entrepreneurs work with “finders” who promise to help them attract investors, usually in exchange for a large monthly retainer and a percentage of the capital raised. More often than not, finders are not properly licensed as a securities broker, and are operating in violation of federal (and often state) securities laws.
Why should you care? Among other things, your investors can demand a return of their capital (and possibly hold you personally liable) if you use an unlicensed broker to raise capital on your behalf. And there are many stories of finders who simply disappear as soon as you hand them a big fat retainer check.
For additional details, read the The Secret World of Finders in the March 2005 edition of Inc. Magazine.
Bottom line: Retain a good corporate/securities attorney well before you start looking for capital, and follow their advice very carefully. If you do choose to hire a finder, check with the National Association of Securities Dealers and with your state’s securities regulators to verify that your finder is properly licensed and to see if there are any recent complaints against them.