ACG takes backend equity instead of transaction fees so the firm gets paid when you get paid, at a future liquidity event, not at closing. That single choice changes the incentive behind every recommendation. A firm paid at closing has a reason to push you toward a raise. A firm paid at exit has a reason to hold you back until the terms are right. The engagement itself runs through five phases, from Discovery to a liquidity event, and each phase builds on the one before it.
Key Takeaways
- Placement agents and brokers on small private offerings often charge 5 to 10 percent of gross proceeds, paid at closing from the money you raised.
- ACG accepts equity instead, so the firm is paid only at a future liquidity event, and shares the downside if the raise fails.
- Fee structure shapes advice. A closer earns when capital clears; an equity holder earns when the company succeeds.
- The ACG engagement moves through five phases: Discovery, an optional convertible note bridge, PPM drafting, offering launch, and liquidity event.
- ACG works with six to eight clients a year, is not a broker-dealer or law firm, and coordinates the PPM with securities counsel.
Capital-formation consulting is the practice of helping an early-stage company structure, document, and position a securities offering for accredited investors. The fee model behind that help shapes the advice you receive, from the first meeting to the final close.
What Does Capital-Formation Consulting Cost?
The cost question seldom has one answer. Some firms charge a monthly retainer whether or not you raise. Some take a percentage of gross proceeds the moment funds clear. Some bundle both into a hybrid that is hard to model before the raise ends. On small private offerings, placement agents and brokers often charge 5 to 10 percent of gross proceeds, which on a $1,000,000 raise is $50,000 to $100,000 out of the money meant to fund the business.
Read the fee structure with the same care you give an investor term sheet. A founder spends weeks on pitch materials. Then closing fees absorb a large share of working capital. That founder ends up worse off than one who never hired a consultant. Evaluating the model at the outset protects the company and shows which relationships are built for a shared outcome.
Transaction Fees Versus Equity Compensation: What Is the Difference?
The difference is timing and direction of incentive. A transaction fee is cash paid from the proceeds at closing, owed whether or not the company later grows. Equity compensation is an ownership stake the firm holds, paid only when you reach a liquidity event such as an acquisition, a merger, or a public offering. A firm holding equity has no reason to push a premature raise, because a weak raise lowers the value of the stake it holds.
| Factor | Transaction fee | Equity compensation |
|---|---|---|
| When the firm is paid | At closing, from proceeds | At a future liquidity event |
| Certainty of payment | Fixed, owed at close | Contingent on the outcome |
| Incentive it creates | Close the transaction | Grow the company’s value |
| Downside on a failed raise | Borne by the founder | Shared by the firm |
| Best for | A one-time, transactional raise | A founder who wants a long-term aligned partner |
Economists call the underlying problem the principal-agent problem: when the agent’s interest diverges from the principal’s, the agent pursues their own interest even while advising. Equity compensation compresses that gap. When the firm’s return depends on the same outcome you are working toward, the advice lines up with your goal rather than against it.
How Does the ACG Five-Phase Engagement Work?
ACG runs every engagement through five sequential phases, from first evaluation to a liquidity event. This is not a menu of standalone services. Each phase feeds the next. Capital formation is a set of compounding decisions about structure, positioning, compliance, and narrative. Made in the right order these decisions produce a fundable offering; made out of order they produce confusion.
ACG works with six to eight clients a year, and that limit is deliberate. The equity model demands deep involvement with each company, and that depth does not survive a high volume of simultaneous clients. Founders raising $500,000 to $5,000,000, one to three years into operations and preparing for a Seed or Series A, fit the profile the model serves best.
Discovery and Deal Structure
Discovery is a detailed evaluation of the business model, financial position, capitalization table (the legal record of who owns what), and fundraising goals. A company that enters Discovery without a clear answer on use of proceeds, valuation basis, or investor target leaves with those answers documented and defensible. Deal structure follows: whether to issue equity, convertible notes (short-term debt that converts to equity at a later round), or SAFEs. Each instrument carries different effects on control, dilution, and investor expectations, and a wrong choice at the outset is expensive to correct mid-raise.
The Optional Convertible Note Bridge
For a company not yet ready for a priced equity round, ACG offers an optional convertible note phase as a bridge. A convertible note is a loan that converts into equity at a qualifying future round, often at a discount to the price later investors pay. It lets a founder begin raising from accredited investors before the company is ready to set a price. Accredited investors are individuals or entities that meet the SEC income or net-worth thresholds. ACG does not recommend it as a default, because the structure adds maturity dates, interest, and cap and discount negotiations of its own.
PPM Drafting and Offering Launch
The Private Placement Memorandum, or PPM, is the offering’s disclosure document. It sets out the terms, the risks, the financial history, and the use of proceeds. Under Rule 506(c) of Regulation D, which permits general solicitation, meaning public advertising of the offering, every purchaser must be a verified accredited investor. ACG coordinates the PPM with securities counsel, the attorneys licensed to give legal advice on the offering. ACG does not provide legal advice; it makes sure the narrative, projections, terms, and risk factors are accurate and complete before the document goes out. Once the PPM is done and the offering launches, the work moves into active investor engagement.
Why Does Backend Equity Change the Advice You Get?
You may have heard that equity is deferred cost, and that the effective price can exceed a transaction fee. That comparison treats the two models as identical except for timing, and they are not. A transaction fee is certain, owed at close no matter how the capital performs. Equity is contingent, realized only if the company reaches a liquidity event of real value. A firm on the equity model carries an ongoing interest in your success past the close, and that interest changes every recommendation it makes.
Skin in the Game Versus Billing by the Hour
Holding equity means bearing the consequence of the outcome. If the company fails, the stake is worth nothing. If it succeeds, the stake is worth a share of that success. That produces a different quality of attention than a billing relationship, where revenue comes from time spent, not results reached. The difference shows most when the honest advice is hard to hear. A company that is not ready to raise, or that holds a valuation expectation its metrics do not support, needs to hear that early. A firm billing for the work can take the engagement anyway and still get paid. A firm holding equity loses if it starts too early, so it says so.
What Alignment Means for a Founder
Alignment means the actions the firm is most motivated to take are the same actions most likely to help you. It does not mean you agree on everything. It means disagreements are about strategy and judgment, not about the firm’s need to generate revenue. That shows most in the middle of a raise, when investors push back on terms or a decision arrives on whether to extend the timeline. Founders who have worked both models often describe the equity-aligned firm as behaving more like a co-founder than a vendor.
What Does ACG Not Do, and Why Does That Matter?
ACG is not a broker-dealer and does not act as one. A broker-dealer is a firm licensed to buy and sell securities for others and to earn transaction-based pay for it. ACG does not solicit investors, introduce them to specific offerings, or take pay contingent on the sale of securities in a way that would require broker-dealer registration. That distinction protects you, because engaging an unregistered broker-dealer carries legal risk for the issuer, not the consultant alone.
ACG is also not a registered investment adviser and does not give legal advice. The firm prepares founders and their offerings for the market: developing the narrative, structuring the deal, coordinating compliant offering documents with securities counsel, and positioning the company to engage verified accredited investors under Rule 506(c). Legal responsibility for the offering documents rests with the issuer and their attorneys. A focused scope keeps every part of the engagement in the hands of a party with the right expertise and, where it applies, the right license.
Frequently Asked Questions
How long does the ACG engagement take from Discovery to offering launch?
For most companies in the target profile, the period from signed engagement to offering launch runs eight to 16 weeks. The timeline depends on the complexity of the existing cap table, the deal structure chosen, and the time securities counsel needs to finalize the PPM. Companies that start with clean corporate records, clear financials, and a defined use of proceeds move faster than those that need cleanup first.
What happens if the raise does not close?
Under the equity model, ACG receives no cash payment if a raise fails to close, because the firm’s pay is contingent on a future liquidity event. A raise that does not close is a loss for both sides. That shared downside gives ACG a strong reason to apply rigorous evaluation before accepting an engagement and to pursue a well-structured offering throughout.
Can a founder already working with securities counsel engage ACG?
Yes. ACG coordinates with existing counsel and does not require founders to replace their attorneys. The split is clean: counsel handles legal advice and document drafting; ACG handles deal-structure strategy, investor positioning, and offering preparation.
Is Rule 506(c) right for every raise in the $500K to $5M range?
No. Rule 506(c) permits general solicitation, so you can advertise the offering, but every purchaser must be verified as accredited through documentation such as tax returns, bank statements, or a written confirmation from a licensed professional. A founder raising from a personal network with no plan to advertise may find Rule 506(b), which bars general solicitation but permits up to 35 non-accredited investors, a better fit. Decide with securities counsel.
How does ACG select the six to eight clients it works with each year?
ACG weighs the defensibility of the business model, the founder’s operating track record, and the plausibility of the projections. It also weighs the fit of the raise size to the stage and the match between the company’s profile and the accredited investor market. A first-time company with no revenue or product traction is a poor fit. The model serves founders who have shown enough proof of concept to make a credible case. They need structured support to present it through a compliant offering.
Founders weighing capital-formation partners can review the approach at AseaCapitalGroup.com and decide whether an introductory conversation fits their timeline.
Prepared by Asea Capital Group, a capital-formation consulting firm in Miami, Florida. This article is educational and is not investment, legal, or tax advice. ACG is not a broker-dealer or law firm.
Sources: Angel Investors Network, What Capital Raising Costs; FactRight, Private Placements Explained: Fees and Expenses.
