The Need of Placement Agent in Business Fundraising

In the world of business fundraising, Placement Agent plays a great role in assisting entrepreneurs, private companies, or institutional investors who are willing and capable of investing a private equity fund. Sometimes Placement Agent is an individual but more often a financial firm and they are usually structured as groups within huge investment banking firms such as Credit Suisse Private Fund Group and UBS Investment Bank, or as separate boutique investment banks such as MVision Private Equity Advisers and Campbell Lutyens.

Placement Agent serves several functions for a company such as raise venture capital, mezzanine capital, or growth capital, as well as raise investor commitments to new private equity funds. In order not to spend too much time seeking for its own business capital or growth equity investors, a company hires a Placement Agent so that the company can aim more attention at management issues rather than focusing on how to raise venture capital.

Placement agents are mostly compensated through fees ranging from 1 percent to 3 percent by the companies or individuals who raise capitals. Sometimes their fees and terms of engagement would extremely vary depending on the length of time to execute the fund and based on the amount of money raised. They bring a myriad of relationships with venture capital investors and they can also advise some existing owners of private equity assets on secondary market sales of their interests.