If a person is sick, they see a doctor. If a person has legal troubles, they see an attorney. Logic would then suggest that a person in need of financial planning would seek the assistance of an investment professional.
This maxim however is not always adhered to within the anomaly that is the capital markets. Rather, it is tested each and every time technological innovations are made. From day-trading to house-flipping, technology advancements seeking to improve market efficiencies often drive an unintended corollary whereby individuals are tempted to disrupt or replace the entire market infrastructure. Call it hubris or ignorance, but there is something deep in the American psyche that murmurs “I am a savvy investor or entrepreneur and I don’t need professional help engaging the market!” Read More
Want to hear a very poorly kept secret? Access to private investment opportunities is extremely limited and inequitable. This has been true on Wall Street for decades due to some rather stringent regulatory hurdles governing the marketing of private offerings, as well as the critical need to keep private deal information, well, private. Historically this has meant that investment banks hired on behalf of private companies and funds to raise capital have been left to manage closed, manually-driven processes where only their small roster of “known investors” were even contacted about the opportunities. Given the size of the new issue private markets (roughly $1 trillion per annum), this is quite remarkable. Fortunately, the tides are now turning.
Whether you are a new entrepreneur or a seasoned executive, you are familiar with the challenge of allocating scarce resources. You make choices everyday based on perceived costs and benefits on where to invest your time and where to seek assistance. Accessing the private capital markets is no different. Thanks to new legislation under the JOBS Act, as well as some innovative technology, the private capital markets are opening up. This creates new choices for companies seeking to raise private capital through the advent of online fundraising platforms.
On one end of the spectrum lies the DIY model where companies are free to go it alone and directly control the capital raising process with potential investors. Professional intermediaries are cut out, which in theory should result in lower transaction costs. The argument goes something like this: “I only pay an agent to introduce me to investors, so thanks to the online platform, I don’t need them anymore”. Such may be the case if targeted investor introductions were the only value offered by a placement agent.