Federal ID: 91-6001537
ISSN: 0022-1090 (Print) | 1756-6916 (Online)
♦ This study analyzes Form D filings to understand brokered startup offerings. 60% of brokers are FINRA-registered; the rest, “finders,” are not. Startups with fewer seasoned investors and more local brokers tend to use brokers. Venture capital firms rarely join brokered offerings, but nonaccredited investors do, especially offerings with finders. Overall, brokers aid in raising capital. Yet, startups using finders often fail to exit successfully and close following funding. This implies finders might be directing funds from non-accredited investors to lower-quality startups. Brokers help startups raise money without VC support, but the effectiveness of this capital allocation is unclear.
Read it here.