I sourced a deal - how do I get paid

Hi Guys

I just sourced a deal for my fund (VC/Growth Equity). We're talking low 8 figures EV.

Is there some kind of standard finder's fee in the market (people working in VCs/Summit/TA please advise)? What should I negotiate with my partners?

 

If you dont have a contract dont think youre necessarily going to get paid. I have interned at pe firms where interns sourced deals as regular parts of their responsibilities and didnt get paid. Presumably you mean the deal has already gone through and the financing is currently taking place and you didnt just get a cim or youre going through DD/legal work. Also, are you an associate at this firm, or an intern?

“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” - Schopenhauer
 
SirTradesaLot:
Is there a reason you didn't try to clarify with your firm earlier?
Yea, this seems like more of a front end question...
If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

I interned at a VC and ended up bringing in an investor for one of the portfolio companies that needed a bridge loan. I received a 5% 'finders fee'.

Take a look at this:

http://www.msilimited.com/Downloads/Fees%20and%20Services.pdf

Someone in another forum said "There is a standard followed by most finders called "Lehman Formula". But you can literally ask whatever you think is right -between you and the startup guys"

Disclaimer for the Kids: Any forward-looking statements are solely for informational purposes and cannot be taken as investment advice. Consult your moms before deciding where to invest.
 

I sourced a 650k vc investment for a small ($100m) family office. Was outside of my job description so we had never really discussed what sort of fee there would be until after the transaction closed. I ended up getting 1% phantom carry, which paid out 18 months later. IMO 1% was a little below fair, but given that with my network and strength of relationship with the target company, I couldn't really shop the investment, there really isnt much you can do. Its like banking bonuses - hold your hands out and see what you get.

 

Not sure about Summit paying $200k. Usual practice is to give the associate who sourced the deal a high annual bonus (end of the year would be 100-150% of base instead of 70-80%) and then actually give all associates in the firm a sourcing bonus of $5000-10,000 depending on deal size so all of them are aligned. Since you are a smaller shop, you should push for both (but nothing close to $200k) and ask for an opportunity to coinvest in the deal

 
Best Response

I can say without question that Summit doesn't pay $200K per sourced deal. I don't know Summit's exact compensation with non-carry folks, but I think it's probably some dollar amount per $1M in funding, similar to other models. JMI's used to be $1K per $1M sourced up to $40K. So if you sourced a $40M deal, you get a $40K sourcing bonus. This is, of course, in addition to a base (at Summit, $100K-$110K for first year associate) plus some guaranteed bonus, say 50%-100% of base.

Keep in mind this is on the upper-end of growth equity firms. TCV, JMI, Summit, TA - that's compensation there. For earlier stage firms writing smaller checks - North Bridge, General Catalyst, Battery - there's probably a slightly lower base, lower guaranteed bonus, and a fixed sourcing bonus with some form of phantom carry in sourced deals.

Without a contract, you shouldn't expect anything. I would advise having a candid discussion with your boss about a finder's fee, but don't go in there acting like you're entitled to anything because that'll earn you the quick "GTFO."

 

When you sit with your manager it will help a lot if you are prepared to justify the amounts you are asking for. I've heard a pure finders fee of c. 20bps to 30bps i.e. you literally just introduce two parties who then deal with each other + you do some basic work going forward. If there is no contract as such they can always take you for granted so need to be tactful.

 

Itaque deleniti eligendi nam aut molestias omnis. Modi est qui distinctio eum. Quis atque voluptatem ipsam sit fugiat debitis. Illo autem esse excepturi neque. Quibusdam et sed earum ea voluptatem molestiae nam.

Placeat exercitationem doloribus nesciunt alias incidunt minus. Quia quibusdam voluptatem qui commodi qui cupiditate dolore. Qui sapiente optio id quisquam.

Career Advancement Opportunities

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Warburg Pincus 99.0%
  • Blackstone Group 98.4%
  • KKR (Kohlberg Kravis Roberts) 97.9%
  • Bain Capital 97.4%

Overall Employee Satisfaction

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 98.9%
  • KKR (Kohlberg Kravis Roberts) 98.4%
  • Ardian 97.9%
  • Bain Capital 97.4%

Professional Growth Opportunities

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Bain Capital 99.0%
  • Blackstone Group 98.4%
  • Warburg Pincus 97.9%
  • Starwood Capital Group 97.4%

Total Avg Compensation

March 2024 Private Equity

  • Principal (9) $653
  • Director/MD (21) $586
  • Vice President (92) $362
  • 3rd+ Year Associate (89) $280
  • 2nd Year Associate (204) $268
  • 1st Year Associate (386) $229
  • 3rd+ Year Analyst (28) $157
  • 2nd Year Analyst (83) $134
  • 1st Year Analyst (246) $122
  • Intern/Summer Associate (32) $82
  • Intern/Summer Analyst (313) $59
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
kanon's picture
kanon
98.9
6
dosk17's picture
dosk17
98.9
7
GameTheory's picture
GameTheory
98.9
8
CompBanker's picture
CompBanker
98.9
9
DrApeman's picture
DrApeman
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”