SUCCESSFEES.COM • CEO RESOURCE LLC • STARTUP FUNDRAISING
SUCCESS FEES, FINDER’S FEES & TRANSACTION-BASED COMPENSATION
Before You Promise Somebody A Percentage Of Your Capital Raise, Understand The Potentially Existential Problem You May Be Creating.
And if you are wondering why I will not take a percentage of your fundraising success instead of charging you for my consulting time, this page explains that too.
UPDATED SEPTEMBER 19, 2026
WHY I OWN SUCCESSFEES.COM
I own SuccessFees.com for two very deliberate reasons.
First, I want startup founders to understand how dangerous an improperly structured success-fee or finder’s-fee arrangement can become before they make a commitment that may later threaten the financing itself.
Second, I want prospective CEO RESOURCE LLC clients to understand why I will not agree to “just take a percentage when we raise the money.”
If I work for you, I want to be paid for my time, judgment, analysis and work performed—not compensated according to whether investors ultimately purchase securities.
I HAD TO ANSWER THIS QUESTION FOR MYSELF
This was never merely an academic securities-law question for me.
Of the 49 companies and partnerships I founded, I personally raised outside investor capital for 44 of them—44 successful raises totaling $120.1 million in today’s dollars from 1,342 investors.
When you are personally responsible for finding that much capital, you look very carefully at every lawful way available to get help finding investors.
I certainly did.
I looked for the legal exception. The workaround. The structure. The supposed loophole that would allow somebody to bring investors to one of my companies and simply receive a percentage of whatever they raised.
What I found over and over again was that the apparent “loopholes” were generally narrow, fact-specific, technically demanding, dependent upon exactly what the person did, or unable to solve both the federal and state-law issues confronting the ordinary startup financing.
MY PRACTICAL CONCLUSION AFTER DOING 44 RAISES
For the typical startup founder, there is no broad, simple, dependable “success-fee loophole” that I would tell you to rely upon without your own qualified securities attorney approving the exact arrangement.
There are narrow exemptions, safe harbors and unusual fact patterns.
That is completely different from saying:
“Sure. Pay the guy 5% of whatever he raises.”
That casual arrangement is exactly the kind of thing that can create a much larger problem than whatever money you thought you were saving.
THE PRACTICAL RULE FOR STARTUP FOUNDERS
Do not promise a finder, consultant, advisor, introducer or other person compensation that depends upon whether securities are sold or how much investor capital is raised until your own qualified securities counsel has approved the exact arrangement.
Transaction-based compensation is one of the clearest warning signs that someone may be engaging in activity requiring broker-dealer registration.
THE TITLE ON THE BUSINESS CARD DOES NOT SOLVE THE PROBLEM
Calling somebody a:
- Finder
- Consultant
- Strategic Advisor
- Business Development Consultant
- Capital Consultant
- Introducer
- Advisor
does not determine whether securities law treats the person as a broker.
Regulators look at what the person actually does and how the person is compensated.
TRANSACTION-BASED COMPENSATION IS A MAJOR RED FLAG
Potential warning signs include compensation such as:
- 5% of whatever capital is raised;
- a commission for every investor who writes a check;
- a fee payable only if the financing closes;
- a bonus based on the size of the financing;
- equity linked to completed investor transactions; or
- another economic benefit that depends directly or indirectly upon securities sales.
Transaction-based compensation is not necessarily the only factor in the legal analysis. But it is an important one.
REGULATION D DOES NOT AUTOMATICALLY EXEMPT YOUR FINDER
Regulation D addresses whether the SEC registration requirements applicable to the OFFERING can be avoided.
That is a different question from whether the PERSON helping sell the securities must be registered as a broker.
A private placement does not automatically turn otherwise regulated broker activity into unregulated consulting.
RULE 506(b) AND RULE 506(c) DO NOT CREATE A BLANKET SUCCESS-FEE EXCEPTION
Rule 506(b) and Rule 506(c) are widely used Regulation D exemptions.
Rule 506(c) permits general solicitation when its requirements are satisfied, including accredited-investor verification.
Neither provision should be interpreted as blanket permission to pay an otherwise unregistered person transaction-based compensation for selling your securities.
REGULATION CROWDFUNDING IS A DIFFERENT SYSTEM
Regulation Crowdfunding offerings are conducted through an appropriately registered intermediary—a broker-dealer or funding portal.
Funding portals operate within a specialized regulatory framework.
That framework should not be confused with a general right for an ordinary finder to collect transaction-based compensation from a Rule 506 financing.
“BUT I FOUND A STATE FINDER EXEMPTION…”
This is where founders can get themselves into serious trouble.
Some states have limited finder provisions or exemptions.
That does not mean:
“Great—now federal law no longer matters.”
Your company may have to satisfy federal law and the laws of every state relevant to the offering.
A SECURITIES LAW FIRM’S WARNING ABOUT CALIFORNIA’S FINDER EXEMPTION
California adopted a specific state finder exemption with detailed restrictions and requirements.
That caused some people to conclude that California had finally created the easy success-fee solution.
The securities attorneys at Holland & Hart published an extremely useful analysis explaining why founders should still be very careful, including the critical distinction between a California state exemption and the separate federal broker-dealer question.
I strongly recommend reading it before concluding that a California finder provision solves your problem.
ANOTHER SECURITIES LAW FIRM PUTS THE PROBLEM VERY DIRECTLY
Attorneys Clifford A. DeGroot and Michael C. Phillips of Davis Wright Tremaine published an excellent discussion specifically addressing this question:
“Can a Startup Pay a Transaction-Based Fee or Commission to Someone Who Helps Raise Capital?”
Their article explains the broker-dealer issue and, importantly, why the consequences can extend to rescission, founder exposure, enforcement and problems in later financings.
THE POTENTIAL CONSEQUENCES SHOULD GET EVERY FOUNDER’S ATTENTION
Depending on the facts and applicable law, using someone who should have been registered may create exposure involving:
- SEC enforcement;
- state securities-regulator enforcement;
- civil liability;
- possible criminal exposure in serious circumstances;
- rescission claims;
- return of investor funds;
- interest and attorneys’ fees under applicable law;
- problems with later financing rounds;
- problems discovered during acquisition or IPO due diligence;
- questions about enforceability of the finder’s compensation agreement; and
- possible regulatory disqualification or other restrictions.
That is a remarkable amount of potential risk to accept merely because somebody offered to “make a few introductions for five percent.”
THE WORD THAT SHOULD REALLY SCARE A STARTUP CEO: RESCISSION
Rescission generally involves unwinding a transaction and returning the parties toward their prior positions.
In a securities offering, that can potentially mean investors seeking their money back.
Now imagine that the money has already been used to hire people, build products, buy equipment, advertise and operate the business.
Where exactly is the startup supposed to find the money to give it back?
THE TIME BOMB MAY NOT EXPLODE UNTIL YEARS LATER
You may complete the financing without anybody objecting.
The company may grow.
Then years later a sophisticated venture investor, strategic buyer, investment banker or IPO attorney starts digging through your historical financings.
Eventually somebody asks:
“Who helped sell this financing, and exactly how were they paid?”
An arrangement you thought was harmless can become a major transaction problem precisely when the company finally becomes valuable.
SO NOW YOU KNOW WHY I EXPECT YOU TO PAY ME BY THE HOUR
When prospective clients ask me, “Why don’t you just take a percentage of whatever you help us raise?” my answer is simple:
Because I am being paid as your management consultant—not as an unregistered securities salesperson.
I expect to be compensated for the time I spend analyzing your company, questioning assumptions, reviewing documents, improving your business model, preparing you for investor scrutiny, identifying problems, helping solve those problems and helping you implement the work.
You are paying for my experience, Compound Knowledge™, judgment and work performed.
You are not buying investor introductions.
You are not paying me a commission on securities sold.
And my compensation does not become larger simply because an investor ultimately decides to invest more money.
AN HOURLY FEE IS NOT A MAGIC BROKER-DEALER EXEMPTION EITHER
This distinction matters.
Simply calling compensation “hourly consulting fees” would not legalize activities that independently require broker-dealer registration.
That is why CEO RESOURCE LLC’s role is management and business consulting, while the client’s securities attorney is responsible for securities-law advice and the client must use appropriately registered securities professionals whenever the contemplated activities require them.
CEO RESOURCE LLC CONSULTING IS TIME-BASED
Public consulting engagements are ordinarily funded in prepaid 10-hour blocks:
STANDARD
$2,500
10 Hours
$250 / Hour
PRIORITY
$3,750
10 Hours
$375 / Hour
TOP PRIORITY
$5,000
10 Hours
$500 / Hour
The difference among the three levels is scheduling priority—not fundraising compensation. None is calculated as a percentage of capital raised.
I ALSO KNOW THIS ISSUE FROM THE BROKER-DEALER SIDE
I was the Founder, CEO and Chairman of Goodman Securities, Inc., a direct-participation broker-dealer and member of the National Association of Securities Dealers, Inc. (NASD) and the Securities Investor Protection Corporation.
NASD subsequently became part of what is now FINRA.
That is historical experience. I am not presently representing through this website that I am acting as a broker-dealer, placement agent or securities salesperson.
1,342 INVESTORS SAID YES. MORE THAN 20,000 PROSPECTIVE INVESTORS SAID NO.
My fundraising experience was not simply learning how to celebrate completed investments.
It also included directly approaching more than 20,000 prospective angel investors who ultimately declined to invest.
That experience taught me an enormous amount about why offerings fail to gain attention, what investors question, which assumptions destroy credibility, what makes executives look unprepared and what companies need to fix before they begin asking people for money.
That is the kind of experience my consulting clients are paying for—not a commission on their securities.
BEFORE YOU HIRE A FINDER, ASK YOUR SECURITIES ATTORNEY THESE QUESTIONS
- What exactly will this person do?
- Will the person solicit prospective investors?
- Will the person recommend the investment?
- Will the person discuss investment merits or terms?
- Will the person participate in negotiations?
- Will the person handle investor funds or securities?
- Is payment contingent upon a financing closing?
- Does payment increase with the amount raised?
- Is the person properly registered if registration is required?
- Does a specific federal exception actually cover these facts?
- Which state laws apply to the issuer, finder and investors?
- What records should we retain demonstrating why this arrangement is lawful?
VERIFY—DO NOT JUST BELIEVE THE FINDER
Do not simply accept:
“Don’t worry. I’ve done this a hundred times.”
Illegal structures can be repeated a hundred times without becoming legal.
Verify registrations through official regulatory sources and have qualified securities counsel review the actual activities and compensation arrangement.
SUCCESS FEES ARE ONLY ONE OF THE DRAGONS IN A REGULATION D OFFERING
A founder also has to understand the applicable exemption, solicitation restrictions, accredited-investor requirements, verification, disclosures, Form D, bad-actor rules, state notices, anti-fraud requirements and other securities-law issues.
Our Regulation D resource provides a broader starting point.
THE BOTTOM LINE
If you are thinking about paying somebody a percentage of the money they help you raise, do not look for an internet loophole.
Get competent securities counsel.
If you want CEO RESOURCE LLC’s management-consulting help preparing your business, improving the story, pressure-testing the assumptions, reviewing the financial model, identifying the dragons and becoming more investor-ready, pay me for that work by the hour.
After personally raising capital 44 times, I would much rather have that clean distinction than gamble your company—or mine—on a supposed loophole.
READY TO GET YOUR COMPANY READY FOR INVESTORS?
If what you need is experienced business-side fundraising preparation, investor-readiness analysis, financial-model review, strategic planning, implementation help or somebody who has personally faced many of the same fundraising dragons, contact me.
Important: This page provides general business and educational information based in part upon Robert Lee Goodman’s historical fundraising and broker-dealer experience. It is not legal, securities, investment, tax or accounting advice. Securities-law requirements are highly fact-specific and involve both federal and state law. Always obtain advice from your own qualified securities attorney concerning your offering and any proposed finder, broker, consultant, placement-agent or compensation arrangement.
Best wishes for stellar success,
Robert Lee Goodman, MBA
CEO & Chief ImpleMentor™
CEO RESOURCE LLC
Elevator Pitch: “I Help Startups Start & Stay Started.” ™ | MBA | 49X Founder | Raised Capital 44 Times For 44 Of My Own Companies And Limited Partnerships = $120.1 million TD From 1,342 Investors | “I HELP STARTUPS PLAN, FUND & IMPLEMENT” | FUNDING NETWORK: 6K Angel Investors / 4.5K VC / 1.5K Family OFFICES – ALL 12K OF WHOM PERSONALLY KNOW ME. | ARE YOU REALLY “READY FOR FUNDRAISING PRIME TIME?”
