What is double compensation?

What are fair compensation structures for an advisor helping a VC fund in capital raising?

• i.e., LP introductions. What are typical structures used by VCs when they engage someone to help with fundraising? What would be reasonable (success) finder's fees? Besides finder type agreements, which may pose legal and tax challenges, has anyone seen different compensation structures? I am helping an established venture capital firm - currently raising their 3 fund - with introductions to new LPs. We were discussing a success-based compensation agreement, but we've started exploring other ideas. Any guidance would be greatly appreciated.

• Answer:

  There's really no such thing as "fair" but there is such a thing as whatever is acceptable and beneficial to both parties. Expand your thinking beyond the standard cash as compensation mindset and I believe you will open up lots of other possibilities that may be more profitable to all concerned, especially you. In the chapter entitled "Ways to Charge For Your iP" in my book "Profit the ExpandoVision Way" (which you can download for free at http://expandovision.com) I list 10 different ways you can get compensated, some of which are cash related and some are not. I recommend you check it out, at the very least it can help you recognize the greater range of options that you really have and give you more tools to negotiate with. For instance, one often overlooked method of getting compensated is special perks, benefits, and in-kind trade. If instead of asking for straight cash, you make up a list of things that you currently spend money on, or that you might like to have, and then ask that the company provide them to you, you may find that they are open and eager to accommodate you, and that you may be able to actually get more, even though it costs them less. Often the in-kind trade that you ask for is for them a discard, or item that they have already paid for that would otherwise just be sitting there unused, or something that they can get a a deep discount. So their providing it to you costs them less than if they had to give you the cash equivalent. You benefit because you are free to now spend the cash that you would have spent on that on something else. Plus, in using the item you may run into other potentially profitable opportunities. For instance, if you have a gym membership that you normally pay for, and you ask them to cover the cost for you in lieu of cash, they may invite you to come work out at a private facility they have, or at a club that they already have a corporate membership to. Adding you to the list may not cost them anything so it makes sense to them as they have already paid for the equipment/membership. Yet for you it not only saves you the cost of paying for your own membership, but you also get the added benefit of being in closer contact and building stronger relationships with the people at the firm who you run into when working out at their gym. Again, make a list of the things you want and would otherwise pay for, and ask them if they would cover the costs of them for you. You don't really have anything to lose by asking, and you may find you gain much, much more. Also make a dream list of "if everything was perfect what would that look like" in terms of your relationship with the firm and with the LPs you are introducing to it. While you may or may not get everything on your list in your negotiations with them, just having the list will open your mind a bit more to what is possible, and my hypothesis is that you would get a lot more by simply asking for it, than you would have otherwise. Most people settle for typical when they could get better. Why be one of them? Why not go for the gusto and get better, or even the best? Be creative and you may find yourself negotiating for some unorthodox things that can have much more value to you than straight cash ever would. You plan spend the cash on something anyways right? Also, you can always negotiate for a combination of cash and other prizes. :-) That way you get the best of both worlds. You and the people you are negotiating with are the ones who determine what is "reasonable". As long as the deal you work out makes sense to both you and them, and as long as it clears legal, who cares whether it is "typical" or not. Perhaps you'll start a new trend and set a new standard. I hope this helps, and if you want any more ideas on how to make the deals more profitable for all concerned, just ask. Godspeed on your negotiations, and may all your days be profitable!