The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies, 2nd Edition

CHAPTER 14 The Role of Placement Agents in Fund-Raising

“I'm no prophet. My job is making windows where there were once walls.”

—Michel Foucault

Placement agents not only advise venture capital funds seeking to raise a new fund, but also broker much of the crucial interaction with institutional investors and key players in the private equity community. Expanding the investor base and accelerating fundraising efforts, placement agents often act as advisors and sounding board. Emerging managers as well as more established firms look to placement agents to gain access to new institutional investors and to streamline the logistics of the fund-raising operations. Beyond opening new doors for funds, agents also influence fund terms and offer advice on market terms and conditions.

Even though the best funds don't need placement agents, across the board, institutional investors prefer to interact with placement agents. A few reputed agents are able to build a matrix of institutional investor relationships and reduce the friction in the process as well. Igor Rozenblit, who led fund investments on behalf of a $2.5 billion European financial services company, says, “Many venture fund managers would not bother to do a primary assessment of our investment criteria and send us completely irrelevant fund memorandums. These would land in the dustbin quickly.” Other institutional investors agreed. Edgar adds, “We get fund memorandums from all over the world—China, India, Brazil—and a lot ...