Placement Agent Fees?

Assume the following:

  • $50M fundraising target.
  • $8M GP commit
  • GP raises another $10M independently.
  • Excellent IRR, but GP hasn't deployed much historically, meaning good chance of strategic drift.
  • Emerging manager.

Questions:

  • Is this too small for any reputable placement agent to get involved?
  • Expected fee structure?
  • GP commit is above average (I think?) based on Preqin but no clue how accurate that data is. Thoughts?
  • Better to raise a small $25M fund and resolve potential worries about strategic drift, then start raising a subsequent fund quickly?

Comments (6)

 
Feb 21, 2021 - 9:51pm

Not too small for a decent agent to raise. Depending on circumstances I have seen anywhere from 2-5% (5% for more venture, direct deals that are not easy raises), I have seen the fee being lower but then the agent is allocated carry, I have also seen retainers in the 10-15k per month range (I have seen 10k for 6 months most often). I would think you can do something in the 3%ish range maybe with a small retainer but without more info hard to say.

 
Feb 21, 2021 - 10:07pm

Thank you for information & offer on the PM side. Probably a little early yet as we're finalizing a few decision/need to make 1 - 2 key hires.

 
Feb 22, 2021 - 4:12am

This is definitely not too small for a reputable placement agent to take on. From my experience, the fees are usually one year's management fee (1.5% - 2%). Retainers are subjective based on the upfront work needed (I have seen 0k - 300k lump sum or 15k - 30k per quarter). The economics are usually negotiable especially for smaller fund sizes. GP commit is definitely above market. Most funds I've seen are in the 1% - 2% range. Unrelated to placement agents, but you will also want to consider whether to add a preferred return (market for PE is 8% while a lot of VCs forego the pref.). Please feel free to shoot me a PM.

 
Feb 22, 2021 - 11:17am

Thanks for the help. Any specific firms you would recommend in that range?

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