Securing capital to fund a new business venture isn’t easy. It can require a lot of patience, persistence and salesmanship, and some start-up founders might struggle just to get an audience with possible investors if they lack the right connections.
This is where finders come in. A finder is someone who is hired by a business to connect them with potential investors. Some might offer a simple introduction, while others might take a more hands-on approach in the deal, but regardless of the specifics, their job is relatively straightforward: to get businesses funded.
The situation is complicated, however, and there are a number of important factors that anyone working in finance should consider before working with finders or investing in the business opportunities they present. For anyone considering a degree in International Finance, here are three things you’ll want to know.
Finders Exist to Connect Businesses and Investors
The primary advantage a finder offers is that they can give entrepreneurs access to their extensive network of potential investors. For start-up founders with a strong business plan but no access to capital, this can be a compelling reason to hire a finder, some of whom are former executives, politicians and the like, with substantial business networks.
From an investor’s perspective, finders can sometimes offer the benefit of vetting investment opportunities and allowing investors to get in early on promising start-ups that might otherwise fly under their radar.
Businesses and investors should be cautious, however, as finders are essentially unregulated. If you’re considering working with a finder after earning your Bachelor of International Finance, you should always carefully examine their resume, reputation and track record.
Students in GBS’s International Finance program learn how to identify good investment opportunities
Many Finders Work in a Legal Gray Area
Despite the possible benefits, one important thing to understand about working with finders is that they often operate in a legal gray area, and some might even be operating in a way that is simply not legal.
The Security Exchange Commission (SEC) and many other international securities commissions view finders as individuals who are promoting the sale of securities. As such, finders are legally required to be in possession of a broker-dealer license. Despite this, many brokers choose to operate without a license.
The legality of this can depend on several factors, including the finder’s compensation structure and how involved they are in a deal. If working with a finder after earning your International Finance degree, it’s best to familiarize yourself with the applicable laws and ensure that they have the appropriate license, as investments involving unlicensed finders can face a number of complications and risks.
Students in International Finance Courses Should Understand the Risks
If a finder violates securities regulations, there are a number of possible repercussions not only for the finder, but also for the company that’s employed them to secure funding, and the investors.
If a transaction is found to violate securities laws, for example, this might mean investors have an opportunity to undo the deal and withdraw their funding, regardless of what agreements or contracts might be in place. This means the involvement of an unlicensed finder can potentially jeopardize a company’s future even after successfully securing funding.
Depending on the violation, other consequences can have even more far-reaching effects. This is another reason why it’s important to carefully vet finders before working with them, to ensure that they can not only fulfill their promises, but do so in a way that is in compliance with the law.
GBS students graduate with all of the skills required to navigate the complex world of finance
Are you interested in studying for a career in international finance?
Contact Geneva Business School for more information about our International Finance courses.