I need to get something off my chest.
At least once a week — sometimes twice if Mercury is in retrograde — someone reaches out to us with a version of the same pitch. It goes something like this:
"Hey, we're an incredible company with massive potential. We need to raise $15 million. We don't want to pay any upfront fees. Just raise the capital, and we'll cut you a percentage of what comes in. Deal?"
No. No deal. And let me explain why in a way that I hope is both entertaining and educational, because apparently this conversation needs to happen publicly.
The "Just Succeed and We'll Pay You" Model
Let me translate this request into other life scenarios so we can all appreciate how absurd it sounds.
Imagine walking into a Michelin-star restaurant and saying, "I'm not going to pay for dinner. But if I enjoy the meal, I'll leave a really generous tip." The maître d' would escort you out with a politeness that barely conceals contempt. And rightfully so.
Or picture calling a contractor and saying, "Build me a house. I'm not paying anything upfront. But once it's built and I move in, I'll pay you a percentage of the home's appraised value." That contractor would laugh so hard he'd drop his nail gun.
Yet somehow, in the world of capital raising, people think this is a perfectly reasonable opening offer.
Why Upfront Fees Exist (A Brief Lesson in How Work Works)
Here's the thing most people don't realize about raising capital: it is a staggering amount of work before a single dollar moves.
We're talking about weeks — sometimes months — of due diligence, financial modeling, building pitch materials, identifying and qualifying investors, making introductions, managing follow-ups, negotiating terms, and holding your hand through the seventeen existential crises you'll have between the first meeting and the close.
That work has a cost. Real humans with real mortgages and real student loans and real coffee addictions are doing that work. And those humans, shockingly, expect to be compensated for their time whether or not your deal closes.
An upfront fee — a retainer, an engagement fee, whatever you want to call it — isn't us being greedy. It's us asking for the bare minimum acknowledgment that our time has value. It's the professional equivalent of a restaurant asking you to at least pay for the ingredients before the chef starts cooking.
"But If You Were Confident In Your Ability, You'd Work on Success Fees Alone"
Ah, this one. This is the Jedi mind trick founders try when they sense the retainer conversation isn't going their way. The implication being that if we really believed in ourselves, we'd bet entirely on the outcome.
Let me flip that logic around for a second.
If you were confident in your company, you'd have no problem paying a retainer — because you'd know the capital raise is going to close and the retainer is a rounding error compared to the millions you're about to bring in.
See how that works? The confidence argument cuts both ways. But only one of us is being asked to work for free.
It's like telling your divorce lawyer, "If you're really a good attorney, just take my case pro bono and collect when I get the settlement." Your lawyer would file a restraining order. Against you.
The Dirty Secret: Pure Success Fee Arrangements Attract the Wrong Partners
Here's something founders don't think about: when you insist on a pure success-fee arrangement, you are self-selecting for a very specific type of capital raiser. And it's not the type you want.
The best, most connected, most experienced capital markets advisors don't need to work for free. They have pipelines. They have relationships. They have options. When you refuse to pay a retainer, you're essentially filtering out the A-team and opening the door to the B-minus team that will blast your confidential information to 400 random email addresses on a spreadsheet they downloaded from LinkedIn.
The advisors willing to work on pure success fees are often the ones who take on 30 engagements at a time, throw everything at the wall, and see what sticks. Your deal becomes one lottery ticket in a stack of lottery tickets. That's not a capital raise strategy. That's a prayer.
Meanwhile, when you engage a quality advisor with a retainer, you get dedicated attention. You get a team that has skin in the game because they've committed resources. You get someone who took on your engagement instead of another one, not in addition to forty others.
"We've Had Bad Experiences Paying Retainers Before"
I hear you. I really do. There are, unfortunately, bad actors in the advisory world who collect retainers and then do approximately nothing. They're the reason you're skeptical, and your skepticism is valid.
But here's the thing: the existence of bad mechanics doesn't mean you should refuse to pay any mechanic ever again. It means you should be more diligent about which mechanic you choose.
Ask for references. Look at track record. Talk to previous clients. Structure the retainer with milestones if that makes you more comfortable. There are a hundred ways to protect yourself that don't involve asking your advisor to work on a hope and a dream.
The "I got burned before" argument is understandable. Using it as a reason to never pay for professional services again is not a strategy — it's a trauma response dressed up as negotiation.
Let's Talk About What You're Really Saying
When a company refuses to pay any upfront fees, what they're really communicating — whether they know it or not — is one or more of the following:
"We don't have the money." This is more common than people admit. If you can't afford a five-figure retainer, investors are going to have serious questions about your cash management and runway. It's a red flag that you're raising capital from a position of desperation, not strength.
"We don't actually value advisory work." If you see capital raising as just "making introductions," you fundamentally misunderstand the process. And that misunderstanding is going to cost you far more than a retainer would have.
"We think we have all the leverage." You don't. In a market where quality advisors can choose their engagements, the leverage belongs to the people with the relationships and the expertise. The sooner you internalize that, the better your fundraising outcomes will be.
The Uncomfortable Math
Let's say an advisory firm charges a $25,000 retainer against a success fee of 3-5% on a $15 million raise. If the raise closes, you're looking at $450,000–$750,000 in total fees, with that $25,000 credited against the total.
You are willing to pay potentially three-quarters of a million dollars upon success — but you won't put up $25,000 to get the process started? That's like agreeing to buy a $75,000 car but refusing to put down a $2,500 deposit.
It makes no financial sense. It makes no logical sense. It only makes emotional sense if you fundamentally don't believe your raise is going to close — in which case, we probably shouldn't be having this conversation at all.
So What Should You Do Instead?
If you're a company looking to raise capital, here's my genuine advice:
Budget for the retainer. Build it into your financial plan. If you can't afford a retainer, you need to solve your cash position before you engage an advisor — not by refusing to pay one.
Negotiate the structure, not the existence. Ask for milestone-based retainers. Ask for the retainer to be credited against the success fee. Ask for a cap. There's plenty of room for creative structuring that protects both parties.
Evaluate your advisor properly. The retainer should give you confidence, not anxiety. If you've done your homework and chosen a firm with a real track record, paying a retainer should feel like an investment, not a gamble.
And for the love of all things holy, stop asking people to work for free. Your accountant doesn't work for free. Your lawyer doesn't work for free. Your landlord definitely doesn't let you live anywhere for free. Capital markets advisory is a professional service, and professional services cost money.
The Bottom Line
I wrote this with love. Genuinely. Because behind every "we don't want to pay a retainer" conversation is usually a founder or a management team that's under real pressure, trying to stretch every dollar, and navigating a process they've never been through before.
I get it. Raising capital is stressful, expensive, and uncertain. But the solution to that uncertainty is not to transfer all the risk to your advisor and hope for the best. The solution is to partner with the right team, invest in the process, and give yourself the best possible chance of success.
And that starts with acknowledging that good work costs money — even before the check clears.