Business investment broker

[Steve Scheffler]

Hi,

I want to create a business that identifies good companies to invest in (I have a criteria for picking such businesses out that I will not mention here) and investors who want to put money into companies and start making a profit right away. I bring these 2 parties together for an agreement where the the investor puts up money in exchange for a percentage off every transaction the business makes after the investment is made. I, as the broker, do not want a fee, rather I want a small percentage of the business transactions as well for a small percentage (smaller than the investor's).

What do I need to do to bring this idea to life? Are there permits, licenses, laws that I need to be aware of?

[Steve Scheffler]

Also, the other question I had was regarding finding investors. I have what I think is a decent strategy for finding the businesses that fit my criteria, but I could use some advice regarding finding investors who have money and are simply looking for the best place to invest it in. Where do I seek out the investors?

[akula]

I'm quite familiar with this space
your thinking is flawed, it does not take into account the needs of your target market

your proposed clients are angel investors and venture capitalists
your solution is supposed to solve their deal flow problem
but these guys don't have a deal flow problem
they don't need your solution

at any rate, even if a fund does have a problem finding deals, your solution is broken because it's affected by adverse selection
any entrepreneurs that you'll be able to attract, are the kind that no one wants to deal with
founders who go through brokers are shunned

go to any vc conference, talk to an actual fund manager, ask her what she thinks about brokers and they'll tell you what i'm telling you

anyways, this is some basic legal analysis
The Search for Venture Capital: Beware of “Finders” Operating As Unregistered Broker-Dealers

what vc's think abut brokers
brokers OR finders - Google Search

read the posts from Fred Wilson and Brad Feld..they've both talked about brokers on their blogs

do you need me to expand on this topic?

[Steve Scheffler]

Thanks for that harsh but necessary reply. Those links were helpful.

[akula]

yea...that's the way things work for early stage equity finance
there are no brokers or middlemen...for a lot of reasons
there were about 500 early stage deals done the last quarter in US...maybe less than ten would have been initiated via a broker
however, it's different for later stage deals
at any rate, take the pepsi challenge...contact a random sample of NVCA members and ask them if they use finders
see for your self what the results are gonna be

that said, look, I understand that you want to help entrepreneurs
there are many ways to help founders
what founders really need help with is sales
if you can commercialise an effective solution to help founders achieve breakeven, you'll help more founders than if you try to find capital for people