How advisers on a private raise are paid

The engagement or retainer fee. Many advisers charge an upfront or monthly fee when a mandate begins. It covers the early work: assessing the business, refining the investment case, preparing the teaser, information memorandum and financial model, and building the investor list. Retainers are commonly modest relative to the success fee and are often credited against it if the raise completes. Some advisers waive a retainer for transactions they are confident in, while others charge more for complex cross-border work. Either way, the retainer is set out in a signed engagement letter and paid by the company to the adviser at the start of the relationship.

The success fee. The larger part of an adviser's compensation is usually a success fee, calculated on the capital raised and payable only when the transaction completes. The rate typically falls as the size of the deal rises, and debt raises commonly attract a lower rate than equity. Some agreements add warrants or a small equity element, particularly for earlier-stage companies. The fee is normally paid by the company at or after closing, once investor money has arrived in the company's own account.

One example of the structure. Wrotham Partners charges an engagement fee set by the size of the raise, plus a success fee on capital raised, with the engagement fee credited against the success fee. In practice this means the engagement fee is effectively an advance on the success fee if the raise completes. Wrotham generally works on raises of about EUR 2 million or more, or the equivalent.

How crediting works in practice. Consider a hypothetical London business that agrees an engagement fee and a success fee with its adviser, then raises EUR 12 million. If the engagement letter credits the engagement fee against the success fee, the company pays at closing only the difference between the success fee due and the engagement fee it has already paid. If the letter does not credit it, the company pays both in full. The headline rates in two proposals can look identical while the total cost differs, so the crediting clause deserves as much attention as the rate itself.

Other terms to read carefully. Engagement letters often include an exclusivity period, a tail clause entitling the adviser to a fee if an investor it introduced invests within a set period after the mandate ends, and provision for reasonable expenses such as travel. Each is standard in principle. The detail matters: how long the tail runs, whether it covers only investors the adviser actively introduced, and whether expenses are capped or need prior approval. For a raise involving Gulf investors, travel can be a meaningful item, so it is worth agreeing in advance how it will be approved and reported.

Questions to ask when comparing proposals. Ask what exactly the engagement fee pays for, and what the company will receive in return. Ask whether it is credited against the success fee. Ask what counts as capital raised: equity only, or also debt, convertible instruments and commitments that are drawn later. Ask whether the success fee is due on money committed or money received. Ask how the tail is defined and whether the adviser will provide a list of introduced investors at the end of the mandate. Ask who else, if anyone, will be paid out of the transaction. Clear written answers make proposals comparable.

Common mistakes. Businesses sometimes compare headline success rates and ignore everything else. Others sign a monthly retainer with no defined deliverables and no end date. Some accept a tail clause that covers every investor the adviser has ever spoken to, rather than those it actively introduced to the company. Some agree to pay fees from more than one adviser on the same capital without realising it. Each of these is avoidable with a careful read and a short conversation before signing.

When a raise does not complete. Under the usual structure, a company that does not raise capital owes no success fee, and the engagement fee is the main cost it has borne. The tail clause is the exception: if an investor the adviser introduced invests within the agreed period after the mandate ends, a fee may still fall due. That is why a clear, written list of introduced investors at the end of a mandate protects both sides, and why a company should know exactly which names are on it before approaching any of them again.

Why the structure aligns incentives. A modest engagement fee combined with a meaningful success fee means the adviser earns most of its income only when the company raises capital on terms it is willing to accept. That gives the adviser good reason to take on mandates it believes can close, to be candid about valuation and to work for the transaction rather than for the retainer. The engagement fee, in turn, shows commitment from the company and pays for real preparatory work. When the balance tips heavily towards upfront fees, it is fair to ask why.

Who pays, and who does not. In a placement, the company pays its adviser. Investors do not pay the company's adviser to see a deal, and a company should not pay an investor for the privilege of receiving investment. Capital moves directly from investor to company under signed documents. An adviser has no reason to hold investor money, and a reputable one never takes custody of it.

A request to pay to release funds is a fraud signal. The most common scam in private capital raising follows a familiar script. A company is told that an investor or lender has approved its funding, and that a payment is needed first to release or unlock funds, described as an administration fee, an insurance bond, a tax clearance or a compliance charge. Legitimate investors and advisers never need a payment from the company before committed capital can move. Capital passes from investor to company under signed documents, and any success fee is paid after the funds arrive. Scams of this kind sometimes borrow the names of real Gulf investors or real advisory firms, which is why independent verification matters.

Simple checks protect a business. Confirm that correspondence comes from the adviser's own corporate domain, and verify any change of payment details by telephone using a number found independently. Never share passwords or grant account access. Ask which authorised entity carries out any regulated activity. Wrotham, for its part, only communicates from @wrothampartners.com addresses, never asks for a fee to release, unlock or guarantee funds, and never takes custody of client or investor money. Anyone unsure whether a message claiming to come from the firm is genuine can check by writing to contact@wrothampartners.com. If anyone asks for payment before funds move, stop and check before paying anything.