advances

People pay advances to Solicitors (without any guarantee of success)..you pay advance fees to Hospitals ( not knowing if the Surgery will be successful)...you pay advances for other services ..not knowing the outcome... yet when it comes to making a token payment for an ( over valued ) business plan then suddenly seekers of capital dole out sob stories...of how some broker took a ( measly) advance and never delivered....Thanks to Google making search free..Project promoters believe that all that the broker does is to search a VC/PE on Google and forward the Business plan...presto the Investor flies down with a cheque book.. So why should he be paid a fat fee at all...

The hours of high-level discussions spent by the Intermediary with the Project promoter carries zero value.. the days and weeks of search and interactions with various investors understanding their preferences/ expectations is treated as free..because the promoter never saw him spend the time..

Most of the people who swore that they will not pay upfront..either did not have the cash to start the engagement or their business plan was only good on paper..it could not pass muster with investors...

Admitted there are several phony promoters as well as intermediaries..just because some project promoters conned investors does not mean PE/VCs will put a blanket ban on funding..
so too it is necessary for project promoters to whet the credentials of the Intermediary .. I believe if they can't judge the capabilities of a Consultant (for the 25 fee) then the project they are promoting is at higher risk..as the investments are 98% more..

Project promoters tend to think they are infallible, they cannot be questioned and their valuation expectations cannot be challenged..Investors should toe their line and not see any 'risk' in the business.. the financial intermediary is expected to sell the highly inflated forecasts ( and the NPV of the Free Cash flows) presented in the Excel sheet. If he reasons then the fee is in jeopardy.

Just because financial intermediaries are small and cannot fight legal battles, project promoters shamelessly circumvent them once a probable lender is identified by the intermediary. Thereafter promoters will do every trick under the sun to deny the intermediary a fee ( making noise about the terms, etc yet going to the same investor through devious route).

This debate can go on endlessly. However serious Consultants don't take up Assignments without an upfront fee.What works for Deloitte or PWC also works for Smaller credible entities.

Promoters should know that they can't build businesses by getting free advice. If not upfront, they could pay a retainer for 3 months or adjust the upfront/ retainer on success. If the deal fails at least they would have learnt some lessons with regard to the weakness in their plans or the investor expectations.