Investment Banking Fees Vs. Consulting Fees

Investment bankers typically raise capital using one of two formulas.  These formulas are referred to as the Lehman Formula, or Double Lehman Formula, and are calculated via the incremental dollar value of the capital raise – typically a percentage descending from 5-10% for the first five million, and thereafter a 1-2% percentage of the remaining capital raise. The first million dollars raised using a “finder”, “investment banker”, “broker” is 5%-10%, the second million dollars raised is 4%-8%, the third million dollars is 3%-6%, the fourth million dollars is 2%-4%, and the fifth million and beyond is 1%-2% of the capital raise.  […]

VCs want bail out money? Really?

The WSJ reported that VCs are lobbying the government to get access to SBA funds from which they are currently excluded. What the article didn’t mention was that this exclusion only applies to companies that are majority owned by VCs. That is they own more than 50% of the ownership. VCs advocate that young high growth companies create 80% of new jobs, which is true. However, companies that are controlled by VCs typically got that way because the company didn’t live up to initial expectations and VCs took more and more capital. Choosing between providing funds to those companies versus […]

Hey Where Did Everybody Go? What Happened To All The IPOs?

Back in the late 1980’s and all of the 1990’s promising growth companies could raise $20-$30 million in equity capital and go public with well recognized names like Prudential Securities, Alex Brown, Salomon Smith Barney and many others. Since then the number of IPOs has dropped considerably particularly for companies seeking to raise less than $50 million. I, like many financial pundits, have blamed increased regulation which drove up the cost of IPOs. However, this white paper suggest it’s was a confluence of many factors (the perfect storm) that did it in and most important was the growth of online, […]