For the most part, however, the venture capital industry recognizes the legitimate role investment bankers play. Most venture capital firms will not decline to review a company business plan because the company has engaged an investment banker. They typically prefer, however, to deal directly with the company s management team through the due diligence process. Many entrepreneurs prefer to raise funds without the assistance of an investment banker and look to investment bankers, instead, only when they prepare to take their companies public. Choosing the best investment banker to lead the underwriting of a company s initial public offering is an important part of conducting any successful public offering.
Investment bankers charge for their services in a variety of ways.
Most look to receive some sort of success fee as part of their compensation that is typically computed as a percentage of funds raised. Engagement agreements with investment bankers can sometimes be complex and should be reviewed carefully before they are signed. Qualified legal counsel can help a company avoid unwanted obligations by reviewing the proposed agreement with company management. The Brokers entry earlier in this book discusses a number of provisions common to investment banking agreements used for raising capital. The Underwriters entry focuses on an investment banker's role in taking a company public.